UNITED STATES



SECURITIES
AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM
10-K/A

Amendment
No. 1



☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the yearly period
ended September 30, 2015



☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period
from _____ to _____.



AIRWARE LABS CORP.

(Exact name of small business
issuer as specified in its charter)



|                             |                                                                                                                              |                       
|---------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | ----------------------
|Delaware                     | 000-54730                                                                                                                    | 98-0665018            
|(State or other jurisdiction | (Commission File Number)                                                                                                     | (IRS Employer         
|of Incorporation)            |                                                                                                                              | Identification Number)
|                             | 7377 E Doubletree Ranch Rd., Suite
        260
        Scottsdale, AZ 85258
        (Address of principal executive offices) |                       
|                             | (480)-463-4246                                                                                                               |                       
|                             | (Registrant’s Telephone Number)                                                                                              |                       





Securities registered pursuant
to Section 12(b) of the Exchange Act:

None



Securities registered pursuant
to Section 12(g) of the Exchange Act:

Common Stock, $0.0001
par value



Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No
☑



Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No
☑



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes ☑ No ☐



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes ☑ No
☐



Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ☐



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
"large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.



|Large accelerated filer  ☐ | Accelerated filer  ☐        
|-------------------------- | ----------------------------
|Non-accelerated filer  ☐   | Smaller Reporting Company  ☑



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑



The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant was $4,519,906, based upon the price ($0.10) at which the common
stock was last sold as of March 31, 2015, the last business day of the registrant’s most recently completed second fiscal
quarter, multiplied by the approximate number of shares of common stock held by persons other than executive officers, directors
and five percent stockholders of the registrant without conceding that any such person is an “affiliate” of the registrant
for purposes of the federal securities laws.



As of February 29, 2016, there were 74,429,954 shares of the registrant’s
$0.0001 par value common stock issued and outstanding.



Documents Incorporated By Reference:  None









EXPLANATORY NOTE



This Amendment No. 1 on Form 10-K/A amends the Company’s Annual Report on Form 10-K for the year ended
September 30, 2015, as filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2016 (the “Original
Filing”).



The purpose of this Amendment No. 1 on Form 10-K/A is to respond to certain comments received from the Staff
of the SEC. For convenience and ease of reference, the Company is filing this Form 10-K/A in its entirety with all applicable
changes and unless otherwise stated, all information contained in this amendment is as of the filing date of the Original
Filing. Except as stated herein, this Form 10-K/A does not reflect events or transactions occurring after such filing date
or modify or update those disclosures in the original Form 10-K that may have been affected by events or transactions occurring
subsequent to such filing date.









TABLE OF CONTENTS



|         |  |                                                                                                              | Page No.
|-------- |  | ------------------------------------------------------------------------------------------------------------ | --------
|         |  | PART I                                                                                                       |         
|Item 1.  |  | Business                                                                                                     | 4       
|Item 1A. |  | Risk Factors                                                                                                 | 8       
|Item 1B. |  | Unresolved Staff Comments                                                                                    | 8       
|Item 2.  |  | Properties                                                                                                   | 8       
|Item 3.  |  | Legal Proceedings                                                                                            | 8       
|Item 4.  |  | Mine Safety Disclosures                                                                                      | 9       
|         |  | PART II                                                                                                      |         
|Item 5.  |  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 9       
|Item 6.  |  | Selected Financial Data                                                                                      | 12      
|Item 7.  |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 12      
|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                                   | 14      
|Item 8.  |  | Financial Statements and Supplementary Data                                                                  | 15      
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         | 40      
|Item 9A. |  | Controls and Procedures                                                                                      | 40      
|Item 9B. |  | Other Information                                                                                            | 40      
|         |  | PART III                                                                                                     |         
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       | 41      
|Item 11. |  | Executive Compensation                                                                                       | 43      
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 45      
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    | 46      
|Item 14. |  | Principal Accounting Fees and Services                                                                       | 47      
|         |  | PART IV                                                                                                      |         
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                   | 47      
|         |  | Signatures                                                                                                   | 48      













PART I



Special Note Regarding Forward-Looking
Statements

This Annual Report on Form 10-K contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”)
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements
are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,”
“expect,” “intend,” “plan,” “believe,” “foresee,” “estimate”
and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees
of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and
uncertainties include the following:



| | · | The availability and adequacy of our cash flow to meet our requirements;
| | - | ------------------------------------------------------------------------

| | · | Economic, competitive, demographic, business and other conditions
in our local and regional markets;
| | - | ----------------------------------------------------------------------------------------------------

| | · | Changes or developments in laws, regulations or taxes in our industry;
| | - | ----------------------------------------------------------------------

| | · | Actions taken or omitted to be taken by third parties including
our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Competition in our industry;
| | - | ----------------------------

| | · | The loss of or failure to obtain any license or permit necessary
or desirable in the operation of our business;
| | - | ---------------------------------------------------------------------------------------------------------------

| | · | Changes in our business strategy, capital improvements or development
plans;
| | - | ----------------------------------------------------------------------------

| | · | The availability of additional capital to support capital improvements
and development; and
| | - | -------------------------------------------------------------------------------------------

| | · | Other risks identified in this report and in our other filings
with the Securities and Exchange Commission or the SEC.
| | - | ----------------------------------------------------------------------------------------------------------------------



This report should be read completely and
with the understanding that actual future results may be materially different from what we expect. The forward looking statements
included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring
after the date of this Report. We will not update forward-looking statements even though our situation may change in the future
and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or
otherwise.



Use of Term



Except as otherwise indicated
by the context, references in this Annual Report to the words "we," "our," "us," the "Company,"
"AIRW," or “Airware” refers to Airware Labs Corp. All references to “USD” or United States
Dollars refer to the legal currency of the United States of America.







|ITEM 1. | BUSINESS.
|------- | ---------



Corporate Background



We were incorporated in
Delaware on June 15, 2010 under the name Crown Dynamics Corp. The Company’s original business plan was to develop dental
technology.



On January 3, 2012, the
Company implemented a 3 for 1 forward stock split of its issued and outstanding shares of common stock to the holders of record.
As a result of the split, each holder of record on the record date automatically received two additional shares of the Company’s
common stock. The accompanying financial statements and related notes thereto have been adjusted accordingly to reflect this forward
stock split.



On January 20, 2012, the
Company entered into an Exclusive Technology License Agreement (the “Zorah Exclusive License Agreement”) with Zorah
Technology LLC (“Zorah”) and shifted our business focus away from dental technology to greater applications in home
medical technology. The Zorah Exclusive License Agreement required a one-time issuance of One Million One Hundred and Twenty-Five
Thousand (1,125,000) shares of restricted common stock to Zorah. As a result of the Zorah Exclusive License Agreement, the Company
obtained exclusive rights to develop and distribute Zorah’s various technologies, which include a wireless technology to
remotely monitor senior citizens and special needs adults and a transdermal blood sugar monitoring unit, which would allow people
to take their blood sugar levels without pricking themselves (the “Zorah Technology”).



On March 20, 2012, through
an equity exchange agreement (the “Share Exchange”), the Company acquired all of the issued and outstanding stock of
Airware Holdings, Inc., a Nevada corporation (“Airware”), in exchange for 21,629,695 shares of the Company’s
newly-issued common stock. Airware Holdings, Inc. was formed in February 17, 2010 as a Nevada corporation and is a non-prescription
medical products company. Since the Share Exchange, the principal business purpose of the Company has shifted to the development,
manufacture and distribution of nasal breathing devices. The Company now targets prospective customers such as compassionate sleeping
partners, individuals with allergies and athletic enthusiasts throughout the United States, Canada and Europe.



On August 23, 2012, the
Company entered into a Non-Exclusive License Agreement (the “Agreement”) with Zorah Technology, LLC (“Zorah”).
The Agreement required a one-time issuance of Two Hundred Thousand (200,000) shares of restricted common stock in exchange for
non-exclusive rights to develop and distribute the Zorah Technology. This Non-Exclusive License Agreement is meant to modify the
existing license agreement originally entered into by the Company and Zorah on January 20, 2012. As a result of this modification,
the 1,125,000 common shares issued pursuant to the January 20, 2012 Agreement were cancelled and returned to treasury.



Effective on November 13,
2012, the Company’s name was changed from Crown Dynamics Corp. to Airware Labs Corp.



Our principal offices are
located at 7377 E Doubletree Ranch Rd., Suite 260, Scottsdale, AZ 85258. Our registered agent for service of process in Delaware
is located at 113 Barksdale Professional Center, Newark, DE 19711, and our registered agent is Delaware Intercorp. Our fiscal year
end is September 30.



All references to “we,”
“us,” “our,” “Airware,” “Airware Labs,” or similar terms used in this Annual Report
refer to Airware Labs Corp.





4







Business Summary



To
date, we primarily engage in the development, manufacture and distribution of nasal breathing devices. The Company has a portfolio
of patents all related to the nasal dilator-breathing device, both filtered and non-filtered, and its use as a primary delivery
mechanism through the nasal passage of therapeutic essential oils. The Company targets prospective customers such as compassionate
sleeping partners, individuals with chronic sinus issues, individuals that suffer from chronic sleep disorders and individuals
with allergies throughout the United States, Canada, Asia and Europe. The Company utilizes information and current studies in the
development and manufacture of our products in order to help promote the health benefits of improved breathing, particularly information
regarding breathing and its impact on the human body, the effects of environmental factors, and the potential benefits provided
by the strategic use of therapeutic essential oils. The Company is supported by a selective group of highly experienced doctors,
engineers and scientists who provide advice and information on research topics relevant to the Company’s business purpose.

Business Plan

Airware
Labs is a leader in innovative breathing technology solutions and consumer product offerings that enhance breathing. Airware products
provide consumers with safe and effective methods to control their own personal breathing environment. Our filtered product also
contains 3M filtration media for allergy sufferers.

Airware
Labs maintains an efficient and economic corporate structure, outsourcing manufacturing and distribution through key strategic
partnerships. Airware manufactures all products in China through an exclusive partnership with a factory that manufactures Airware
products. Airware’s corporate headquarters are located in Scottsdale, Arizona and houses the management, sales and marketing
teams.

In
April of 2012, Airware entered into a strategic partnership with Quest Products, Inc. (“Quest”), whereby Quest will
promote and distribute the AIR® product line. Quest Products, Inc. (www.questproductsinc.com) provides turnkey solutions to
Consumer Products Group (“CPG”) companies looking to develop their product's distribution and sales to all classes
of trade. Quest works with varying sizes of CPG companies, from inventors and entrepreneurs beginning start-up brands, to large
industry leading CPG manufacturers looking to expand their reach. Quest's unique core competencies allow them to create turnkey
solutions and drive new and incremental opportunities in sales for their client partners. Quest's sales team works with food, drug,
and mass retailers across the USA and Canada, including Wal-Mart, Target, CVS, and Walgreens. Quest was listed as one of the fastest
growing companies four years in a row by INC. Magazine.

Quest
was successful in placing the AIR® product line with many of the largest online retailers, including Walgreens.com, Amazon.com,
Drugstore.com, Target.com and more. Quest has also been successful in placing AIR® products in approximately 7,300 Walgreens
stores located in the United States and the Company continues to receive reorders from Walgreens. Quest is presently attempting
to gain distribution in other retail chains.

In
March of 2014, Airware entered into a Joint Venture (“JV”) with Eastar Industries in China to act as the exclusive
distributor for all Airware products with an initial focus on the AIR® filters product line. Eastar Industries, a subsidiary
of Eastar Chemical Corporation, focuses on Eastar's pharmaceutical and health/beauty business for China and selected Southeast
Asian countries. Eastar Industries licenses patented pharmaceuticals, medical devices and unique health/beauty products from U.S.
and European companies for import to China and Southeast Asia through its local joint venture partner companies. Airware will own
18% of the JV that is formed in Hong Kong. Initial launch of AIR® PM2.5 began in December of 2014 in response to the severe
pollution issues burdening most of the tier 1 cities of China. While Eastar remains a distribution partner, the creation of the
JV entity has been put on hold as Airware evaluates new distribution options in the Asian market. Given the poor air quality and
high demand for discreet and effective personal filtration devices, Airware is exploring more aggressive strategies to market in
this region.

In
August 2015, Airware hired Dr. Dan Cohen to assume the role of President. Dr.
Cohen is the former Founder, Chairman and CEO of CNS, Inc., parent company of Breathe Right. Dr. Cohen was the driving force behind
the meteoric rise of Breathe Right nasal strips, acquiring the rights to manufacture and sell the product for the medical equipment
company he founded in 1982. With the successful drive to achieve FDA approval for marketing of the largely unknown product and
with all of the top ten pharmaceutical wholesalers on board, Cohen launched a legendary marketing effort to generate market awareness.
His efforts created an outcry of domestic and international consumer demand that rocketed CNS sales to a 77% increase as the company
took the public spotlight and was named Fortune magazine's fourth fastest growing company in the U.S. in 1996. In 2006, GlaxoSmithKline
acquired Breathe Right for $566 million.

Dr. Cohen is a board certified
neurologist and an accomplished entrepreneur. In addition to CNS, Inc., he is also the co-founder of Round River Research Corporation
and the inventor of patented technology used for stress reduction and personal development. Dr. Cohen holds numerous patents related
to EEG signal processing, physiologic analysis algorithms and additional utility patents related to synchronized sound, vibration
and electromagnetic fields and their effect on the body and mind.



Dr. Cohen believes the
Airware Nasal filter to be the best product in the market and has engineered a strategic plan to enhance Airware’s nasal
filtration product line with a launch planned in 2016, which includes extensive PR, education and awareness of the product benefits
and competitive advantages.



5





Business
Opportunity & Product Solutions

In
the US alone, there exists a multi-billion dollar market for health related breathing products. Many of these products are sold
over-the-counter (OTC) and have been developed specifically to enhance nasal breathing, relieve symptoms of allergic rhinitis,
reduce snoring and improve sleep. Air® products specifically target these segments of the OTC breathing products market.

The
AIR® nasal dilator is made from FDA-approved, latex-free/adhesive-free hypoallergenic medical grade material and has
passed both cytotoxicity and an intra-cutaneous reactivity testing. The product is discreet, positioned inside the nostrils, and
gently expands the nasal valve regions of the nasal passages thus opening the nasal airway allowing for easier nasal breathing.
Many snorers do so because they cannot effectively breathe through their nose. By opening up the nasal passages allowing for greater
nasal airflow, users are able to close their mouths and thereby reduce or stop snoring. Improved nasal breathing as well as reduced
snoring generally improves sleep too. Unlike nasal strips, whose sales exceed $150M, the AIR® product can be worn all
day and night in comfort, without significantly altering appearance.

AIR®
nasal products are manufactured with or without 3M's Filtration Media depending on the whether the product is designed to enhance
nasal breathing alone or in addition, filter the air of particulate matter including allergens and bacteria. AIR® Allergy with
3M Filtration Media captures a larger number, and smaller size of particles, preventing them from entering the body. This in turn
helps with the prevention of allergy symptoms and infection gained through airborne illnesses. The product is worn discreetly inside
the nose, allowing daytime or nighttime use.

The
3MTM Air Filter Media used in Air products is uniquely constructed of permanently charged engineered fibers. These high permanent
electrostatic charges allow the fibers to better capture and hold sub-micron particles, allowing particles to be effectively captured
throughout the depth of the media, rather than only on the upstream surface, creating a filter that captures both a smaller sized
particle, as well as an increase in the number of particles collected. The use of this filter technology in the AIR® Allergy
product is the first use of the technology in this format.

Products

Air®Allergy

Air® Allergy
is a discreet personal filter that helps protect you from irritating airborne allergens. Air® Allergy fits just inside
the nose and uses filtration media from 3M to help stop allergens before they enter your system. Air® Allergy is also
lightly infused with a blend of premium therapeutic essential oils that is shown to help reduce the symptoms associated with allergies.

Breathe better. Feel better with Air®
Allergy:

- Helps block airborne allergens like pollen, dust and pet dander
- Filtration media from 3M
- Easy to breathe through
- Drug-free
- Infused with an essential oil blend designed to reduce allergy symptoms
- Soft, comfortable and discreet
- Latex-free



6





Sleep/Snore

Air® Sleep/Snore
provides instant, drug-free relief for congestion and snoring caused by nasal breathing difficulties. It fits discreetly and comfortably
just inside the nose to gently open nasal passages and increase airflow. Air® Sleep/Snore is also infused with a calming
lavender essential oil blend that is shown to help reduce congestion and promote restful sleep.

Breathe better. Sleep better with Air®
Sleep/Snore:

- Instantly relieves nasal congestion
- Clinically proven to reduce snoring
- Infused with a calming lavender essential oil blend
- Drug-free and adhesive-free
- Soft, comfortable and discreet
- Latex-free

Competition

Our
potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical companies, and generic
drug companies that offer products similar to ours. Many of our potential competitors have substantially greater financial, technical,
and human resources than we do, as well as greater experience in the discovery and development of products and the commercialization
of those products. Our competitors’ products may be more effective, or more effectively marketed and sold, than any products
we may commercialize and may render our products obsolete or non-competitive before we can recover the expenses of their development
and commercialization. We anticipate that we will face intense and increasing competition as new products enter the market and
advanced technologies become available. However, we believe that our products offer key potential advantages over competitive products
that could enable our products to capture meaningful market share from our competitors.

WHERE YOU CAN GET ADDITIONAL INFORMATION



We file annual, quarterly
and current reports, proxy statements and other information with the SEC. You may read and copy our reports or other filings made
with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.E., Washington, DC 20549. You can obtain information
on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these reports and other
filings electronically on the SEC’s web site, www.sec.gov.





7







|ITEM 1A. | RISK FACTORS
|-------- | ------------



We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



None.



|ITEM 2. | PROPERTIES
|------- | ----------



Our principal offices are
located at 7377 Doubletree Ranch Rd., Suite 260, Scottsdale, AZ 85258. We currently rent this space for $2,387 per month. The lease
expires on August 31, 2017. We believe that this space is adequate for our current and immediately foreseeable operating needs.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



From time to time, the
Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although
the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters,
it makes provision for potential liabilities when it deems them probable and reasonably estimable. These
provisions are based on current information and legal advice and may be adjusted from time to time according to developments.



On
December 27,2011, the Company was named as a defendant in a lawsuit alleging a default on two notes payable totaling $75,000
plus accrued interest. Ultimately, a judgment for $92,001 was entered against the Company as a result of this lawsuit. Per a later
settlement agreement, the Company has been making monthly payments of $4,000 against this judgment with interest due on the remaining
balance of 4.25% per annum. The notes and accrued interest are reflected in the Company’s Balance Sheets in Convertible
Notes Payable as of September 30, 2014 in the amount of $22,678. During the year ended September 30, 2015, this settlement was
paid in full.



On
August 28, 2014, the Company was named as a Defendant in a lawsuit by a former officer alleging wrongful termination. On March
31, 2015, the Company entered into a settlement agreement with the former officer wherein the Company shall pay $30,000 over the
course of six months, starting on April 7, 2015. The payments through September 30, 2015, totaling $30,000, have been made timely,
satisfying the agreement in full.



Other
than the foregoing, we know of no material, existing or pending legal proceedings against our Company, nor are we involved as
a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any director, officer or any affiliates,
or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.



8







|ITEM 4. | MINE SAFETY DISCLOSURES
|------- | -----------------------



Not Applicable.



PART II

|ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|------- | -------------------------------------------------------------------------------------------------------------



Market Information



Our common stock is currently
quoted on the OTC Bulletin Board. Our common stock has been quoted on the OTC Bulletin Board since November 3, 2011 under the symbol
“CDYY.OB.” On November 9, 2012, our symbol was changed to “AIRW.OB” to reflect the Company’s name
change. Because we are quoted on the OTC Bulletin Board, our common stock may be less liquid, receive less coverage by security
analysts and news media, and generate lower prices than might otherwise be obtained if it were listed on a national securities
exchange.



The following table sets
forth the high and low bid prices for our Common Stock per quarter as reported by the OTC Bulletin Board for the quarterly periods
indicated below based on our fiscal year end September 30. Our common stock began trading in 2012. These prices represent quotations
between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.



|Fiscal Quarter                                 |   | High |      | Low
|---------------------------------------------- | - | ---- | ---- | ---
|First Quarter (Oct. 1, 2013 – Dec. 31, 2013)   | $ |      | 0.30 |    
|Second Quarter (Jan. 1, 2014 – Mar. 31, 2014)  |   |      | 1.50 |    
|Third Quarter (Apr. 1, 2014 – Jun. 30, 2014)   |   |      | 0.39 |    
|Fourth Quarter (Jul. 1, 2014 – Sept. 30, 2014) |   |      | 0.24 |    



|                                               |   |  |       | 
|---------------------------------------------- | - |  | ----- | 
|First Quarter (Oct. 1, 2014 – Dec. 31, 2014)   | $ |  | 0.25  | 
|Second Quarter (Jan. 1, 2015 – Mar. 31, 2015)  |   |  | 0.18  | 
|Third Quarter (Apr. 1, 2015 – Jun. 30, 2015)   |   |  | 0.25  | 
|Fourth Quarter (Jul. 1, 2015 – Sept. 30, 2015) |   |  | 0.299 | 





Record Holders



As of February 29,
2016, there were 74,429,954 common shares issued and outstanding, which were held by 145 stockholders of record.



Dividends



We have never declared
or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future. Furthermore, we expect
to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the
discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants
and other factors the Board considers relevant.



Securities Authorized for Issuance under
Equity Compensation Plans



None.





9





Recent Sales of Unregistered Securities; Use of Proceeds from
Registered Securities



Year Ended September
30, 2014



On October 9, 2013, the
Company issued 255,867 restricted shares of common stock to a related party as payment for interest on loans to the Company for
September 2013, at a cost basis of $0.05 per share.



On November 7, 2013, the
Company issued 293,907 restricted shares of common stock to a related party as payment for interest on loans to the Company for
October 2013, at a cost basis of $0.05 per share.



On December 10, 2013, the
Company issued 291,200 restricted shares of common stock to a related party as payment for interest on loans to the Company for
November 2013, at a cost basis of $0.05 per share.



On January 21, 2014, the
Company issued 382,094 restricted shares of common stock to a related party as payment for interest on loans to the Company for
December 2013, at a cost basis of $0.05 per share.



On January 21, 2014, the
Company issued 102,916 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost
basis of $0.18 per share.



On January 27, 2014, the
Company issued 225,000 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost
basis of $0.165 per share.



On February 20, 2014, the Company issued a total
of 52,941 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost basis of $0.34
per share.



On February 28, 2014, the
Company issued 1,207,388 shares of restricted common stock as payment to settle debts with two parties, eliminating a total of
$301,846.92 of debt.



On February 28, 2014, the
Company received a Warrant Exercise Notice from Stockbridge Enterprises L.P., a Nevada limited partnership (“Stockbridge”),
to purchase 26,200,000 shares of its common stock, par value $0.0001. Stockbridge acquired the warrants pursuant to a Senior Secured
Convertible Note (the “Note”), dated December 14, 2009, by and between Stockbridge and the Company. Pursuant to the
terms of the warrants, Stockbridge elected to use a cashless exercise formula which resulted in the issuance of 22,457,143 shares
of restricted common stock of the Company.



On March 3, 2014, the Company issued 23,200
restricted shares of common stock pursuant to a conversion notice dated February 27, 2014 at a cost basis of $0.25 per share.



On March 7, 2014, the Company issued 920,587
restricted shares of common stock to a related party as payment for interest on loans to the Company for January and February 2014,
at a cost basis of $0.05 per share.



On April 10, 2014, the
Company issued 461,600 shares of restricted common stock to a related party as payment for interest on loans to the Company for
March 2014, at a cost basis of $0.05 per share.



On April 10, 2014, the
Company issued 43,926 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost basis
of $0.34 per share.



On April 10, 2014, the
Company issued 38,465 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost basis
of $0.32 per share.



On May 15, 2014, the Company
issued 470,267 shares of restricted common stock to a related party as payment for interest on loans to the Company for April 2014,
at a cost basis of $0.05 per share.



On May 28, 2014, the Company
issued a total of 29,236 restricted shares of common stock as payment for services rendered to the Company, at a cost basis of
$0.29 per share.



On June 23, 2014, the Company
issued 509,653 shares of restricted common stock to a related party as payment for interest on loans to the Company for May 2014,
at a cost basis of $0.05 per share.





10





On July 8, 2014, the Company
issued 125,000 restricted shares of common stock to one investor at a cost basis of $0.20 per share pursuant to a Subscription
Agreement dated July 2, 2014.



On July 17, 2014, the Company
issued 75,000 restricted shares of common stock pursuant to a Settlement Agreement dated July 3, 2014, at a cost basis of NIL.



On July 17, 2014, the Company
issued 511,600 shares of restricted common stock to a related party as payment for interest on loans to the Company for June 2014,
at a cost basis of $0.05 per share.



On July 23, 2014, the Company
issued a total of 89,837 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost
basis of $0.26 per share.



On July 23, 2014, the Company
issued a total of 12,821 restricted shares of common stock as payment for consulting services rendered to the Company pursuant
to a Consulting Agreement dated March 27, 2014, at a cost basis of $0.39 per share.



On August 4, 2014, the
Company issued 300,000 shares of restricted common stock at a cost basis of $0.20 per an Asset Acquisition Agreement dated July
23, 2014.



On August 12, 2014, the
Company issued 511,600 shares of restricted common stock to a related party as payment for interest on loans to the Company for
July 2014, at a cost basis of $0.05 per share.



On September 15, 2014,
the Company issued 553,653 shares of restricted common stock to a related party as payment for interest on loans to the Company
for August 2014, at a cost basis of $0.05 per share.



On September 15, 2014,
the Company issued 200,000 shares of restricted common stock, at a cost basis of $0.10 per share, pursuant to a Business Development
Consulting Agreement dated September 2, 2014.

Year Ended September
30, 2015

On October 10, 2014, the
Company issued 541,600 shares of restricted common stock to a related party as payment for interest on loans to the Company for
September 2014, at a cost basis of $0.05 per share.

On November 12, 2014,
the Company issued 250,000 restricted shares of common stock to one holder pursuant to a Consulting Agreement dated October 13,
2014, at a cost basis of $0.20 per share.

On November 12, 2014,
the Company issued 576,653 shares of restricted common stock to a related party as payment for interest on loans to the Company
for October 2014, at a cost basis of $0.05 per share.

On November 12, 2014,
the Company issued 72,250 restricted shares of common stock to one holder as compensation for services rendered to the Corporation
from July 1, 2014 to September 30, 2014, at a cost basis of $0.166 per share.

On December 4, 2014, the
Company issued 571,600 shares of restricted common stock to a related party as payment for interest on loans to the Company for
November 2014, at a cost basis of $0.05 per share.

On January 28, 2015 the
Company issued 599,987 restricted shares of common stock to a related party as payment for interest on loans to the Company for
December 2014, at a cost basis of $0.05 per share.



On January 28, 2015 the
Company issued 591,600 restricted shares of common stock to a related party as payment for interest on loans to the Company for
January 2015, at a cost basis of $0.05 per share.



On January 28, 2015 the
Company issued 82,051 restricted shares of common stock as payment for services rendered to the Corporation form October 31, 2014
to December 31, 2014, at a cost basis of $0.15 per share.

On March 17, 2015, the
Company issued 591,600 restricted shares of common stock to a related party as payment for interest on loans to the Company for
February 2015, at a cost basis of $0.05 per share



On April 28, 2015, the
Company issued 629,987 restricted shares of common stock to a related party as payment for interest on loans to the Company for
March 2015, at a cost basis of $0.05 per share.



On April 28, 2015, the
Company issued 250,000 restricted shares of common stock to one shareholder at a cost basis of $50,000.00 pursuant to a subscription
agreement dated April 10, 2015.



On April 28, 2015, the
Company issued 93,970 restricted shares of common stock as compensation to a consultant for services rendered to the Company between
January and March 31, 2015.





11





On July 9, 2015, the Company
issued an aggregate of 1,892,106 restricted shares of common stock to a related party as payment for interest in the months of
April-June, totaling $94,605, on loans to the Company.



On July 9, 2015, the Company
issued 78,100 restricted shares of common stock in settlement of amounts owed to a consultant for services rendered to the Company,
with a grant date fair value of $19,525.



On August 26, 2015, the
Company issued 641,200 restricted shares of common stock to a related party as payment for interest on loans to the Company for
July 2015, at a cost basis of $0.05 per share.



On September 30, 2015,
the Company issued 641,200 restricted shares of common stock to a related party as payment for interest on loans to the Company
for August 2015, at a cost basis of $0.05 per share.

On September 30, 2015,
the Company issued an aggregate 1,850,000 restricted shares of common stock to three shareholders at a cost basis of $0.10 per
share pursuant to a three subscription agreements dated between August 11, 2015 and September 4, 2015.

Subsequent Issuances



On November 5,
2015, the Company issued 641,200 restricted shares of common stock to a related party as payment for interest on loans to the
Company for September 2015, at a cost basis of $0.05 per share.



On December 31,
2015, the Company issued 1,282,400 restricted shares of common stock to a related party as payment for interest on loans to
the Company for October and November 2015, at a cost basis of $0.05 per share. Additionally, the Company issued an
aggregate 200,000 restricted shares of common stock to two shareholders at a cost basis of $0.10 per share pursuant to
two subscription agreements dated between December 3, 2015 and December 14, 2015, and 96,071 restricted shares of common
stock as compensation to a consultant for services rendered to the Company between April 1, 2015 and September 30, 2015. The
shares were valued at the average trading price over the period of service, which approximated fair value, in the amount
of $12,750.



Purchases of Equity Securities by the
Small Business Issuer and Affiliated Purchasers



None.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.



|ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



The following discussion
should be read in conjunction with our audited financial statements and notes thereto included herein. We caution readers regarding
certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by,
or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are
statements not based on historical information and which relate to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect
to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could
cause actual results to differ materially from those expressed in any forward looking statements made by, or our behalf. We disclaim
any obligation to update forward-looking statements.





12





Results of Operations



Total revenue for the years
ended September 30, 2015 and 2014 was $113,022 and $179,494, respectively. The decrease in revenue is due to a reduction in orders
from our major distributor. Cost of goods sold for the year ended September 30, 2015 was $117,306 as compared to $115,663 for the
year ended September 30, 2014, resulting in gross profits of $(4,284) and $63,831 for the years ended September 30, 2015 and 2014,
respectively. The negative gross margin for the year ended September 30, 2015 is primarily due to a write-off of obsolete inventory
in the amount of $21,697.



Operating expenses in the
year ended September 30, 2015 amounted to $1,111,593 as compared to $1,168,929 for the year ended September 30, 2014. The reduction
in operating expenses is due to decreases in consulting and legal fees.



The net loss for the year
ended September 30, 2015 was $4,740,684 as compared to $17,082,226 for the year ended September 30, 2014. The decrease in net loss
is primarily the result of a loss from warrants exercised by a related party during the year ended September 30, 2014.



Liquidity and Capital Resources



Our balance sheet as of September
30, 2015 reflects $41,745 in cash and cash equivalents. Management is continuing to pursue financing from various sources, including
private placements from investors and institutions. Management believes these efforts will contribute toward funding the Company’s
activities until sufficient revenue can be earned from future operations. In addition, the Company is seeking additional distribution
partners in both domestic and foreign markets. Management believes these combined efforts, if successful, will be sufficient to
meet its working capital needs and its currently anticipated expenditure levels for the next year. At this time, our Company does
not have a commitment from any broker/dealer to provide additional financing, and does not have sufficient working capital to
support operations for the next twelve months. There is no assurance that any additional financing will be available or if available,
on terms that will be acceptable.



Cash Flow from Operating Activities



During the year ended
September 30, 2015, the Company used $740,849 in cash from operating activities compared with $738,598 cash used in the year ended
September 30, 2014. From the year ended September 30, 2014 to September 30, 2015 there was an increase in officer salaries, marketing
consultants and dues and subscriptions which were partially offset by reductions in cash payments for consulting fees and travel.



Cash Flow from Investing Activities



During the years ended
September 30, 2015 and 2014, the Company used $6,710 and $16,000 in cash for investing activities, respectively. The decrease in
cash used for investing activities is due to purchasing less property and equipment.



Cash Flow from Financing Activities



During the year ended September
30, 2015, the Company received $746,722 in cash from financing activities. This consisted of $475,322 in net financing from notes
payable and $271,400 in proceeds from the issuance of stock for cash. In comparison, during the year ended September 30, 2014,
the Company received $777,238 in cash from financing activities. This consisted of $1,356,500 in net financing from notes payable,
$25,000 in proceeds from the issuance of stock for cash less $604,262 in payments for the repurchase of common stock and options





13





Going Concern



We have not attained profitable
operations and are dependent upon obtaining financing to maintain existing operations. For these reasons, there is substantial
doubt about our ability to continue as a going concern. Our accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, nor do they include adjustments to the amounts and
classification of liabilities that might be necessary should the Company be unable to continue operations or be required to sell
its assets.



Off-Balance Sheet Arrangements



We have no significant
off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to stockholders.



Future Financings



We will continue to rely
on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will
result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities
or arrange for debt or other financing to fund our operations and other activities.



Critical Accounting Policies



Our financial statements
and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on
a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods.



We regularly evaluate the
accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included
in the notes to our financial statements. In general, management's estimates are based on historical experience, on information
from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.
Actual results could differ from those estimates made by management.



Recently Issued Accounting Pronouncements



The Company has implemented
all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements
unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of operations.



Contractual Obligations



We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this
item.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.





14







|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------





AIRWARE LABS CORP.



INDEX TO FINANCIAL STATEMENTS



SEPTEMBER 30, 2015



|Financial Statements                                                                                           |  | Page
|-------------------------------------------------------------------------------------------------------------- |  | ----
|Reports of Independent Registered Public Accounting Firms                                                      |  | F-1 
|Consolidated Balance Sheets as of September 30, 2015 and September 30, 2014                                    |  | F-3 
|Consolidated Statements of Operations for the years ended September 30, 2015 and September 30, 2014            |  | F-4 
|Consolidated Statements of Stockholders’ Deficit for the years ended September 30, 2015 and September 30, 2014 |  | F-5 
|Consolidated Statements of Cash Flows for the years ended September 30, 2015 and September 30, 2014            |  | F-6 
|Notes to Financial Statements                                                                                  |  | F-7 











15











REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors and Stockholders
Airware Labs Corp.

We have audited the accompanying consolidated
balance sheet of Airware Labs Corp. as of September 30, 2015, and the related statements of operations, stockholders’ deficit,
and cash flows for the year then ended. Airware Labs Corp.’s management is responsible for these consolidated financial statements.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

We were not engaged to examine management’s
assertion about the effectiveness of Airware Labs Corp.’s internal control over financial reporting as of September 30, 2015
and, accordingly, we do not express an opinion thereon.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Airware Labs Corp. as of September
30, 2015 and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements,
the Company has incurred operating losses, has incurred negative cash flows from operations and has a working capital deficit.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plan regarding these matters is also described in Note 2 to the financial statements. The consolidated financial statements do
not include any adjustments that might result from the outcome of this uncertainty.







|D. Brooks and Associates CPA’s, P.A.
|------------------------------------
|West Palm Beach, FL                 
|March 4, 2016                       
|                                    









F-1







To the Board of Directors and
Stockholders of Airware Labs Corp.



We have audited the accompanying consolidated
balance sheets of Airware Labs Corp. as of September 30, 2014 and 2013, and the related consolidated statements of operations,
stockholders’ equity (deficit), and cash flows for each of the years then ended. Airware Labs Corp.’s management is
responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Airware Labs Corp. as of September 30, 2014
and 2013, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has suffered losses from operations since inception and requires additional funds for future operating
activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to
these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Respectfully
submitted,







Weinberg & Baer, LLC

Baltimore, MD

December 29, 2014





F-2







AIRWARE LABS CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2015 AND 2014



|                                                                                                                                                                                      |  | 2015 |             | 2014
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ----
|                                                                                                                                                                                      |  |      |             |     
|ASSETS                                                                                                                                                                                |  |      |             |     
|Current Assets:                                                                                                                                                                       |  |      |             |     
|Cash and cash equivalents                                                                                                                                                             |  | $    | 41,745      |     
|Accounts receivable                                                                                                                                                                   |  |      | 530         |     
|Inventory                                                                                                                                                                             |  |      | 45,457      |     
|Deposits                                                                                                                                                                              |  |      | —           |     
|Prepaid expenses and other
    current assets                                                                                                                                         |  |      | 8,476       |     
|Total current assets                                                                                                                                                                  |  |      | 96,208      |     
|                                                                                                                                                                                      |  |      |             |     
|Other Assets:                                                                                                                                                                         |  |      |             |     
|Property and equipment, net                                                                                                                                                           |  |      | 14,070      |     
|Intangible assets, net                                                                                                                                                                |  |      | —           |     
|Deposits                                                                                                                                                                              |  |      | 2,387       |     
|Investment in Breathe
    Active, LLC                                                                                                                                                 |  |      | —           |     
|Total
    Assets                                                                                                                                                                      |  | $    | 112,665     |     
|                                                                                                                                                                                      |  |      |             |     
|LIABILITIES
    AND STOCKHOLDERS' DEFICIT                                                                                                                                             |  |      |             |     
|Current Liabilities:                                                                                                                                                                  |  |      |             |     
|Accounts payable                                                                                                                                                                      |  | $    | 1,640,327   |     
|Accrued interest - related parties                                                                                                                                                    |  |      | 38,849      |     
|Accrued interest                                                                                                                                                                      |  |      | 1,644       |     
|Accrued expenses                                                                                                                                                                      |  |      | 138,057     |     
|Note payable to former officer                                                                                                                                                        |  |      | 47,500      |     
|Convertible notes payable - current portion                                                                                                                                           |  |      | 5,000       |     
|Convertible notes payable
    to related parties - current portion, net of discount                                                                                                   |  |      | 20,000      |     
|Total current liabilities                                                                                                                                                             |  |      | 1,891,377   |     
|                                                                                                                                                                                      |  |      |             |     
|Accrued interest to related parties                                                                                                                                                   |  |      | —           |     
|Note payable to former officer                                                                                                                                                        |  |      | —           |     
|Convertible notes payable
    to related parties, less current portion                                                                                                                |  |      | 3,206,000   |     
|Total
    liabilities                                                                                                                                                                 |  |      | 5,097,377   |     
|                                                                                                                                                                                      |  |      |             |     
|Commitments and Contingencies                                                                                                                                                         |  |      |             |     
|                                                                                                                                                                                      |  |      |             |     
|Stockholders' Deficit:                                                                                                                                                                |  |      |             |     
|Common stock, par value $.0001
    per share, 200,000,000 shares authorized; 72,210,283 and 62,256,379 shares issued and outstanding at September 30, 2015 and
    2014, respectively |  |      | 7,221       |     
|Common stock to be issued,
    290,000 shares, par value $.0001                                                                                                                       |  |      | 29          |     
|Additional paid-in capital                                                                                                                                                            |  |      | 31,843,635  |     
|Accumulated
    deficit                                                                                                                                                               |  |      | (36,835,597 | )   
|Total
    stockholders' deficit                                                                                                                                                       |  |      | (4,984,712  | )   
|                                                                                                                                                                                      |  |      |             |     
|Total
    Liabilities and Stockholders' Deficit                                                                                                                                       |  | $    | 112,665     |     





The
accompanying notes are an integral part of these financial statements.

F-3







AIRWARE LABS CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND
2014







|                                                |  | 2015 |            | 2014
|----------------------------------------------- |  | ---- | ---------- | ----
|                                                |  |      |            |     
|Revenues, net                                   |  | $    | 113,022    |     
|Cost of
    products sold                       |  |      | 117,306    |     
|Gross
    profit (loss)                         |  |      | (4,284     | )   
|                                                |  |      |            |     
|Operating expenses:                             |  |      |            |     
|General
    and administrative                  |  |      | 869,649    |     
|Sales
    and marketing                         |  |      | 241,944    |     
|Total
    operating expenses                    |  |      | 1,111,593  |     
|                                                |  |      |            |     
|Loss from
    operations                        |  |      | (1,115,877 | )   
|                                                |  |      |            |     
|Other income (expense):                         |  |      |            |     
|Interest
    income                             |  |      | —          |     
|Forgiveness of debt                             |  |      | —          |     
|Induced note conversion expense                 |  |      | —          |     
|Interest expense                                |  |      | (1,126     | )   
|Interest expense - related
parties              |  |      | (2,960,027 | )   
|Loss on deposits                                |  |      | (21,529    | )   
|Valuation loss - common stock
warrants          |  |      | —          |     
|Loss on impairment of intangible
assets         |  |      | (249,180   | )   
|Loss on extinguishment of debt                  |  |      | (392,945   | )   
|Loss on
warrants exercised                      |  |      | —          |     
|Total
    other income (expense)                |  |      | (3,624,807 | )   
|                                                |  |      |            |     
|Loss before income taxes                        |  |      | (4,740,684 | )   
|                                                |  |      |            |     
|Income
    tax expense                          |  |      | —          |     
|                                                |  |      |            |     
|Net
    loss                                    |  | $    | (4,740,684 | )   
|                                                |  |      |            |     
|Basic
    and diluted net loss per common share |  | $    | (0.07      | )   
|                                                |  |      |            |     
|Basic and diluted weighted
    average common   |  |      |            |     
|shares
    outstanding                          |  |      | 66,406,701 |     



The accompanying notes are
an integral part of these financial statements.



F-4









AIRWARE LABS CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT

FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND
2014



|                                                            |  | Common
    Stock |            |   | Additional
    Paid-in |   |       | Common
    Stock
    to be |  |   | Accumulated |   |  |           |    | 
|----------------------------------------------------------- |  | ---------------- | ---------- | - | ---------------------- | - | ----- | -------------------------- |  | - | ----------- | - |  | --------- | -- | 
|                                                            |  | Shares           |            |   | Amount                 |   |       | Capital                    |  |   | Issued      |   |  | (Deficit) |    | 
|Balance at September 30, 2013                               |  |                  | 38,129,100 |   |                        | $ | 3,813 |                            |  | $ | 12,071,023  |   |  | $         | —  | 
|Issuance of stock for cash                                  |  |                  | 125,000    |   |                        |   | 12    |                            |  |   | 24,988      |   |  |           | —  | 
|Exchange of shares for services                             |  |                  | 795,142    |   |                        |   | 79    |                            |  |   | 160,149     |   |  |           | —  | 
|Shares issued in settlement
    of accounts payable         |  |                  | 1,282,388  |   |                        |   | 129   |                            |  |   | 315,219     |   |  |           | —  | 
|Exchange of shares for interest
    expense                 |  |                  | 5,165,228  |   |                        |   | 517   |                            |  |   | 258,385     |   |  |           | —  | 
|Shares issued for conversion
    of notes payable           |  |                  | 20,000     |   |                        |   | 2     |                            |  |   | 7,694       |   |  |           | —  | 
|Stock options issued for services                           |  |                  | —          |   |                        |   | —     |                            |  |   | 56,119      |   |  |           | —  | 
|Stock options repurchased                                   |  |                  | —          |   |                        |   | —     |                            |  |   | (2,500      | ) |  |           | —  | 
|Warrants issued for services                                |  |                  | —          |   |                        |   | —     |                            |  |   | 2,238       |   |  |           | —  | 
|Exercise of warrants - related party                        |  |                  | 22,457,143 |   |                        |   | 2,246 |                            |  |   | 15,717,754  |   |  |           | —  | 
|Discount of convertible notes
    - related party           |  |                  | —          |   |                        |   | —     |                            |  |   | 1,402,000   |   |  |           | —  | 
|Shares issued for purchase
    of assets                    |  |                  | 300,000    |   |                        |   | 30    |                            |  |   | 40,470      |   |  |           | —  | 
|Stock repurchased and cancelled                             |  |                  | (6,017,622 | ) |                        |   | (602  | )                          |  |   | (601,160    | ) |  |           | —  | 
|Net loss                                                    |  |                  | —          |   |                        |   | —     |                            |  |   | —           |   |  |           | —  | 
|Balance at September 30, 2014                               |  |                  | 62,256,379 |   |                        |   | 6,226 |                            |  |   | 29,452,379  |   |  |           | —  | 
|Issuance of stock for cash                                  |  |                  | 2,100,000  |   |                        |   | 210   |                            |  |   | 271,161     |   |  |           | 29 | 
|Exchange of shares for services                             |  |                  | 498,271    |   |                        |   | 50    |                            |  |   | 85,951      |   |  |           | —  | 
|Shares issued in settlement
    of accounts payable         |  |                  | 78,100     |   |                        |   | 7     |                            |  |   | 19,517      |   |  |           | —  | 
|Exchange of shares for interest
    expense - related party |  |                  | 7,277,533  |   |                        |   | 728   |                            |  |   | 1,051,251   |   |  |           | —  | 
|Stock options issued for services                           |  |                  | —          |   |                        |   | —     |                            |  |   | 68,438      |   |  |           | —  | 
|Warrants issued for services                                |  |                  | —          |   |                        |   | —     |                            |  |   | 3,993       |   |  |           | —  | 
|Discount of convertible notes
    - related party           |  |                  | —          |   |                        |   | —     |                            |  |   | 498,000     |   |  |           | —  | 
|Warrants issued for debt extinguishment
    - related party |  |                  | —          |   |                        |   | —     |                            |  |   | 392,945     |   |  |           | —  | 
|Net loss                                                    |  |                  | —          |   |                        |   | —     |                            |  |   | —           |   |  |           | —  | 
|Balance at September 30,
    2015                           |  |                  | 72,210,283 |   |                        | $ | 7,221 |                            |  | $ | 31,843,635  |   |  | $         | 29 | 



The accompanying notes are
an integral part of these financial statements.



F-5







AIRWARE LABS CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND
2014



|                                                                            |  | 2015 |            | 2014
|--------------------------------------------------------------------------- |  | ---- | ---------- | ----
|                                                                            |  |      |            |     
|Operating Activities:                                                       |  |      |            |     
|Net loss                                                                    |  | $    | (4,740,684 | )   
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |            |     
|Depreciation and amortization                                               |  |      | 64,480     |     
|Common stock issued/obligated for services                                  |  |      | 86,001     |     
|Options and warrants issued for services                                    |  |      | 72,431     |     
|Loss on impairment of intangible assets                                     |  |      | 249,180    |     
|Interest expense from amortization of debt discount                         |  |      | 1,901,341  |     
|Induced conversion expense                                                  |  |      | —          |     
|Stock issued for payment of interest on convertible notes - related party   |  |      | 1,051,979  |     
|Exchange of sales proceeds for mold                                         |  |      | (8,290     | )   
|Loss on extinguishment of debt                                              |  |      | 392,945    |     
|Forgiveness of debt                                                         |  |      | —          |     
|Loss on warrants exercised                                                  |  |      | —          |     
|Valuation expense - common stock warrants                                   |  |      | —          |     
|Changes in operating assets and liabilities:                                |  |      |            |     
|Accounts receivable                                                         |  |      | 2,607      |     
|Inventory                                                                   |  |      | 26,157     |     
|Prepaid expenses                                                            |  |      | 57,729     |     
|Deposits                                                                    |  |      | 10,000     |     
|Accounts payable                                                            |  |      | 20,323     |     
|Accrued interest                                                            |  |      | 7,067      |     
|Accrued expenses                                                            |  |      | 65,885     |     
|Net Cash Used in Operating Activities                                       |  |      | (740,849   | )   
|                                                                            |  |      |            |     
|Investing Activities:                                                       |  |      |            |     
|Purchases of property and equipment                                         |  |      | (6,710     | )   
|Net Cash Used in Investing Activities                                       |  |      | (6,710     | )   
|                                                                            |  |      |            |     
|Financing Activities:                                                       |  |      |            |     
|Stock issued for cash                                                       |  |      | 271,400    |     
|Proceeds from convertible notes payable - related party                     |  |      | 498,000    |     
|Repayment of convertible notes payable                                      |  |      | —          |     
|Repayment of notes payable                                                  |  |      | (22,678    | )   
|Options re-purchased                                                        |  |      | —          |     
|Stock re-purchased                                                          |  |      | —          |     
|Net Cash Provided by Financing Activities                                   |  |      | 746,722    |     
|                                                                            |  |      |            |     
|Net Increase (Decrease) in Cash                                             |  |      | (837       | )   
|                                                                            |  |      |            |     
|Cash - Beginning of Year                                                    |  |      | 42,582     |     
|                                                                            |  |      |            |     
|Cash - End of Year                                                          |  | $    | 41,745     |     
|                                                                            |  |      |            |     
|Supplemental disclosure of cash flow information:                           |  |      |            |     
|Interest paid in cash                                                       |  | $    | 292        |     
|Income taxes paid in cash                                                   |  | $    | —          |     
|                                                                            |  |      |            |     
|Non-cash investing and financing activities:                                |  |      |            |     
|Stock issued for convertible notes                                          |  | $    | —          |     
|Debt discount on note payable, related party                                |  | $    | 498,000    |     
|Stock issued in settlement of accounts payable                              |  | $    | 19,524     |     
|Stock issued to acquire intangible assets and property                      |  | $    | —          |     
|Warrants issued to related party for convertible note modification          |  | $    | 392,945    |     
|Credit towards manufacturing mold from factory                              |  | $    | 8,290      |     





The accompanying
notes are an integral part of these financial statements.



F-6









AIRWARE
LABS CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Summary of Significant Accounting Policies and
Use of Estimates

Basis
of Presentation and Organization

Airware Labs Corp. (“Airware Labs”
or the “Company”), formerly Crown Dynamics Corp., is a Delaware corporation. The Company was incorporated under the
laws of the State of Delaware on June 15, 2010. On October 26, 2012, the Articles of Incorporation were amended to reflect a name
change to Airware Labs Corp.

On March 20, 2012, through an equity exchange
agreement, the Company acquired all of the issued and outstanding stock of Airware Holdings, Inc., a Nevada corporation (“Airware”),
in exchange for shares of the Company’s newly-issued common stock. Airware Holdings, Inc. was formed in February 2010 and
is a non-prescription medical products company. The principal business purpose of the Company is to develop, manufacture and distribute
breathing solutions that address major respiratory challenges impacting human health.



Principals of Consolidation

The accompanying consolidated financial statements
include the accounts of Airware Labs Corp and its wholly owned subsidiary, Airware Holdings, Inc. Intercompany balances and transactions
have been eliminated.



Accounting Estimates



The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could materially differ from those estimates. Significant estimates of the Company include accounting for depreciation
and amortization, recoverability of intangible assets, deferred income taxes, accruals and contingencies, estimates for customer
returns, the fair value of common stock and the estimated fair value of stock options and warrants.



Cash and Cash Equivalents



The Company considers all highly liquid instruments
purchased with a remaining maturity of three months or less to be cash equivalents.



Accounts Receivable



The Company follows the allowance method of
recognizing uncollectible accounts receivable. The allowance method recognizes bad debt expense based on a review of the individual
accounts outstanding and the Company’s prior history of uncollectible accounts receivable. As of September 30, 2015 and 2014,
no allowance was established for potentially uncollectible accounts receivable as none was deemed necessary. During the years ended
September 30, 2015 and 2014, the Company had no write-offs of receivables. The Company had sales returns totaling $31,177 and $20,709
for the years ended September 30 2015 and 2014, respectively. Additionally, an allowance for sales returns in the amount of $13,000
was established during the year ended September 30, 2015. The Company’s policy is to record finance charges on outstanding
delinquent accounts receivable only if they are collected. Accounts receivable are generally unsecured.



Inventory



Inventory is mostly held by a third party, consists of finished
goods and is stated at the lower of cost, determined by the first-in, first-out method, or market.



Property and Equipment



Property and equipment are recorded at cost.
Depreciation is provided for on the straight-line method, over the estimated useful lives of the assets.
Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged
to expense as incurred. Betterments or renewals are capitalized when incurred. Gains and losses on the disposition of property
and equipment are recorded in the period incurred. Production molds owned by the Company are capitalized and are included in manufacturing
equipment. Pre-production design and development costs are expensed as incurred.



The
estimated useful lives of property and equipment are:





|• | Manufacturing
    equipment        | 2-3
    years
|- | ---------------------------------- | -------------
|  |                                    |              
|• | Office
    furniture and equipment | 5-7
    years









F-7





Intangible Assets

Intangible assets consist of patents
and intellectual property and are amortized over the period that the Company believes best reflects the time frame in which the
economic benefits will be consumed. The Company evaluates intangible assets with definite lives for recoverability when events
or circumstances indicate that these assets might be impaired. The Company recognized a loss on impairment of intangible assets
of $249,180 and $0 for the years ended September 30, 2015 and 2014, respectively.

Income Taxes



The Company recognizes deferred tax assets
and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements
or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial
statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.



On an on-going basis, the Company assesses
the likelihood that the deferred tax assets will be recovered from future taxable income. At September 30, 2015 and 2014, it was
believed that the recovery of the deferred tax assets was less than likely and therefore, a full valuation allowance was established.



Interest relative to income taxes is charged
to interest expense and penalties are charges to general and administrative costs if there are any assessments. No interest or
penalties relative to income taxes have been recognized during the years ended September 30, 2015 or 2014.



The Company files income tax returns
in the U.S. federal jurisdiction, and the State of Arizona. The Company is subject to U.S. federal, state, and local income tax
examinations by tax authorities. All periods beginning on or after January 1, 2012 are open to examination by taxing authorities.
The Company believes it has no tax positions for which the ultimate deductibility is highly uncertain.

Revenue Recognition



The Company recognizes revenue on the
sale of products at the time of delivery and acceptance. Delivery is generally FOB destination. At the time of delivery, the following
have occurred:

| | · | Evidence of delivery;
| | - | ---------------------

| | · | A price per unit has been determined; and
| | - | -----------------------------------------

| | · | Collectability has been reasonably assured.
| | - | -------------------------------------------



Revenues are recorded net of returns and co-operative advertising
costs.



Fair Value of Financial Instruments



The carrying value of the Company’s
financial instruments, consisting of cash, accounts payable, convertible notes payable to third parties, and related party notes
payable to former officer, approximate fair value due to their short term to maturity.  The carrying value of the Company’s
related party convertible debt approximates fair value due to the terms that are similar to current market rates.

Net Loss Per Share



Basic earnings per share does not include
dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an
entity. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive. Due
to the net losses for the years ended September 30, 2015 and 2014, basic and diluted loss per common share were the same, as the
effect of potentially dilutive securities would have been anti-dilutive.

As of September 30, 2015 and 2014, there
were total shares of 42,492,512 and 33,753,341, respectively, issuable upon conversion of notes payable, exercise of warrants and
options that were not included in the earnings per share calculation as they were anti-dilutive.



F-8





Shipping and Handling

Shipping and handling costs associated
with the shipment of products to the customer are recorded as costs of goods sold and totaled $11,495 and $11,950 for the years
ended September 30, 2015 and 2014, respectively.

Advertising Costs

Advertising costs are charged to expense
when incurred.  Total advertising expense recognized during the years ended September 30, 2015 and 2014 were $11,950 and $6,883,
respectively. Advertising expense is included in selling and marketing expenses on the accompanying consolidated statements of
operations.

Stock-Based Compensation

All share-based payments to employees, including
grants of employee stock options, are expensed based on their estimated fair values at grant date, in accordance with ASC 718.
Compensation expense for stock options is recorded over the vesting period using the estimated fair value on the date of grant,
as calculated using the Black-Scholes model. We classify all share-based awards as equity instruments and recognize the vesting
of the awards ratably over their respective terms.



Recent Accounting Pronouncements

There have been no recently issued accounting
pronouncements that have had or are expected to have a material impact on the Company’s financial statements.

Note 2 - Going Concern

The Company has incurred losses since
inception and requires additional funds for future operating activities. The Company’s selling activity has not yet reached
a level of revenue sufficient to fund its operating activities. These factors create an uncertainty as to how the Company will
fund its operations and maintain sufficient cash flow to operate as a going concern.

The Company’s ability to meet its cash
requirements in the next year is dependent upon obtaining additional financing and achieving improved sales levels. If this is
not achieved, the Company may be unable to obtain sufficient cash flow to fund its operations and obligations, and as a result
there is substantial doubt the Company will be able to continue as a going concern. The accompanying consolidated financial statements
have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and
classification of recorded asset amounts; nor do they include adjustments to the amounts and classification of liabilities that
might be necessary should the Company be unable to continue operations or be required to sell its assets.



Note 3 - Property and Equipment,
Net

The following represents a summary of
our property and equipment:

|                               |  | September 30,
|------------------------------ |  | -------------
|                               |  | 2015         
|Manufacturing equipment        |  | $            
|Office furniture and equipment |  |              
|                               |  |              
|Less: accumulated depreciation |  |              
|                               |  | $            







Depreciation expense was $20,968 and $29,080
for the years ended September 30, 2015 and 2014, respectively.



Note 4 - Intangible Assets

The Company’s intangible assets
relate to the Company’s patents and intellectual property. For the Company’s Air product line, these assets were amortized
over the remaining life of the original patent, which was 7.25 years as of September 30, 2014. At September 30, 2014, the net carrying
value of the Air patents was calculated as follows:

|Gross carrying amount          |  | $ | 481,337  |  
|------------------------------ |  | - | -------- | -
|Less: accumulated amortization |  |   | (224,655 | )
|                               |  | $ | 256,682  |  





For the year ended September 30, 2015, management
deemed these amounts to be fully impaired and recorded a loss on impairment of $222,168.



On July 23, 2014, the Company entered into
an Asset Acquisition Agreement whereby it purchased a patent related to a line of beauty products that the Company plans to produce
and market. This patent was amortized over the remaining life of the original patent, which was 3.9 years as of September 30,
2014. At September 30, 2014, the net carrying value of the beauty patent was calculated as follows:



|Gross carrying amount          |  | $ | 38,000 |  
|------------------------------ |  | - | ------ | -
|Less: accumulated amortization |  |   | (2,280 | )
|                               |  | $ | 35,720 |  



For
the year ended September 30, 2015, management deemed these amounts to be fully impaired and recorded a loss of $26,723.



Amortization expense was $43,511 and $36,671
for the years ended September 30, 2015 and 2014, respectively.





F-9





Note 5 - Convertible Notes Payable



Convertible notes payable consist of the following:

|                                                                                                                                                                                                                                                                                                                                                                                                        |  | September
    30,
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------
|                                                                                                                                                                                                                                                                                                                                                                                                        |  | 2015             
|8.00%
    note payable, due August 22, 2012, convertible into common stock at $.50 per share, interest payments are due at maturity,
    unsecured, in default.                                                                                                                                                                                                                                         |  | $                
|6.50%
note payable, due November 26, 2011, convertible into common stock at $2 per share, interest payments are due annually, unsecured.
Terms amended in March 2013 to interest at 4.25%, with $4,000 monthly payments of principal and interest. During the years ended
September 30, 2015 and 2014, the Company repaid convertible notes payable in the amount of $22,678 and $27,322, respectively. |  |                  
|                                                                                                                                                                                                                                                                                                                                                                                                        |  |                  
|Less
    current portion                                                                                                                                                                                                                                                                                                                                                                                |  |                  
|                                                                                                                                                                                                                                                                                                                                                                                                        |  | $                





Note 6 - Notes Payable to Former Officer



Notes payable to a former officer consists
of the following:

|                                                                                                    |  | September
    30,
|--------------------------------------------------------------------------------------------------- |  | -----------------
|                                                                                                    |  | 2015             
|Note
    payable bearing interest at 0.27%, due August 1, 2016, interest due at maturity, unsecured |  | $                





On December 5, 2013, the Company entered into
a revised promissory note with our former President calling for four equal payments to begin on November 1, 2015 and ending August
1, 2016. Interest was reduced from 2.0% to 0.27%.



Note 7 - Convertible Notes Payable to Related Parties



Convertible notes payable to related parties
consist of the following:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | September
    30,
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 2015             
|12%
    note payable net of unamortized debt discount of $0  and $1,403,341, at September 30, 2015 and  2014,
    respectively, due September 30, 2017, convertible to common stock at $.10 per share, interest payments are due monthly.  During
    the year ended 2015, the Company drew $498,000 against this note.  Additionally, on August 31, 2015 the maturity
    date was extended from September 30, 2015 to September 30, 2017. Debt is secured by substantially all of the assets of the
    Company. |  | $                
|8.00
    % note payable due August 26, 2012, convertible to common stock at $.50 per share, interest payments are due at maturity,
    unsecured, in default.                                                                                                                                                                                                                                                                                                                                                      |  |                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                  
|Less
    current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $                





Interest
expense on the convertible notes payable to related parties (including amortization of debt discount of $1,901,341 and $1,075,878,
respectively) was $2,958,299 and $1,348,266 for the years ended September 30, 2015 and 2014, respectively. Interest expense on
the line of credit was settled via the issuance of 7,277,533 shares stock during the year ended September 30, 2015.



On August
31, 2015, the Company entered into an allonge to the convertible note to related parties through which the maturity date was extended
by two years to September 30, 2017. In consideration for this extension, the Company granted 3,500,000 common stock warrants. The
modification was accounted for as an extinguishment and the Company recorded a loss on extinguishment of debt of $392,945 based
on the fair value of the warrants. The fair value of the warrants was estimated using a Black Scholes model on the following assumptions:



|Expected stock price volatility |  | 28.96%  
|------------------------------- |  | --------
|Expected dividend yield         |  | 0.00%   
|Risk-free interest rate         |  | 1.54%   
|Warrant term                    |  | 10 years



The future minimum payment of the convertible
notes payable due to related parties for each of the following years and in the aggregate:



|Years ending September 30, |  | Amount               
|-------------------------- |  | ---------------------
|2016                       |  | $              20,000
|2017                       |  | $         3,206,000  





F-10





Note 8 - Related Party Transactions



As detailed in Notes 7 and 8, the Company
has a note payable to its former President, a convertible note payable to a former advisory board member and another convertible
note with an entity that owns 58.4% of our outstanding shares.

On December 5, 2013, the Company entered into
a share re-purchase agreement with the former President to buy back 7,567,622 shares of common stock held by him and entities under
his control.  Other outside investors were granted the opportunity to participate in this purchase, with 1,550,000 shares
being purchased directly from the former President by others, and 6,017,622 being re-purchased by the Company and cancelled. 
Upon completion of this transaction on December 17, 2013, our former President no longer has any ownership in the Company.



As disclosed in Note 12, on October 4, 2013,
the Company granted a total of 583,333 stock options to officers and a Board member. Additionally, on September 5, 2014, the Company
granted a total of 783,333 stock options to officers, significant consultants and a Board member.



On February 5, 2014, our primary debt
holder and a 58.4% shareholder submitted Warrant Exercise Notices pursuant to which it exercised all of its 26,200,000 outstanding
warrants. The holder elected to use the cashless exercise option provided for in the warrants, which resulted in the issuance of
22,457,143 shares of common stock. Additionally, during the year ended September 30, 2015, the Company borrowed an additional $498,000
against the convertible secured note and issued 7,277,533 shares of stock in payment of interest on the convertible note.

The Company paid $87,500 during the
years ended September 30, 2015 and 2014 to a company owned by its CFO for her services as CFO. Additionally, we granted 0 and 200,000
options to our CFO directly for the years ended September 30, 2015 and 2014, respectively.

The Company paid $15,624 during the
year ended September 30, 2015 to a company owned by its President for his services as President. Additionally, we granted 500,000
options to our President directly during the year ended September 30, 2015.

During the years ended September 30, 2015 and
2014, the Company paid zero cash for interest on the related party debt.



Note 9 - Income Taxes



The Company’s provision for income tax (benefit) expense from
operations consists of the following:



|                         |  | For the years ended September 30,
|------------------------ |  | ---------------------------------
|                         |  | 2015                             
|Current:                 |  |                                  
|Federal and State        |  | $                                
|Deferred:                |  |                                  
|Less valuation allowance |  |                                  
|Recognized tax benefit   |  | $                                





The following table summarizes the significant
differences between the U.S. federal statutory tax rate and the Company’s effective tax rate for financial statement purposes
for the years ended September 30, 2015 and 2014:

|                                |  | For the years ended September 30,
|------------------------------- |  | ---------------------------------
|                                |  | 2015                             
|                                |  |                                  
|U.S. federal statutory tax rate |  |                                  
|State taxes                     |  |                                  
|Decrease in valuation allowance |  |                                  
|Non-deductible items            |  |                                  
|Totals                          |  |                                  



The tax effects of temporary differences
that give rise to deferred tax assets and liabilities as of September 30, 2015 and 2014 are summarized as follows:

|                                 |  | For the years ended September 30,
|-------------------------------- |  | ---------------------------------
|                                 |  | 2015                             
|                                 |  |                                  
|Net operating loss carryforwards |  | $                                
|Valuation allowance              |  |                                  
|Deferred tax assets, net         |  | $                                



F-11





Note 10 - Commitments and Contingencies

On December 22, 2011, the Company entered into
a distribution agreement that provides for the issuance of common stock warrants, with an expiration date of 3 years, for the purchase
of the Company’s common stock in an amount equal to 15% of the total products purchased by the distributor from the Company
at the invoice price against the previous year’s purchases of paid invoices. The warrant price will be equal to the closing
price of the Company’s stock price at the anniversary date of the agreement. As discussed in Note 12, per this agreement
the Company issued a three-year warrant to purchase 172,078 shares at $.14 on December 23, 2013. Additionally, the Company issued
another three-year warrant to purchase 145,510 shares at $.13 on December 22, 2014. The Company recorded the fair value of the
warrants, totaling $3,993 and $2,338 for the years ended September 30, 2015 and 2014, respectively, as consulting fees.



On December 27,2011, the Company
was named as a defendant in a lawsuit alleging a default on two notes payable totaling $75,000 plus accrued interest. Ultimately,
a judgment for $92,001 was entered against the Company as a result of this lawsuit. Per a later settlement agreement, the Company
made monthly payments of $4,000 against this judgment with interest due on the remaining balance of 4.25% per annum. The notes
and accrued interest are reflected in the Company’s consolidated balance sheets in convertible notes payable as of September
30, 2014 in the amount of $22,678. During the year ended September 30, 2015, this settlement was paid in full.

The Company is in default on a convertible
note payable totaling $5,000 and a convertible note payable to a related party totaling $20,000. The Company has attempted to communicate
with the note holders to request extensions or conversion, but has been unsuccessful in doing so. The full balance on these notes
are included in current liabilities.

On September 20, 2012, the Company entered
into an agreement with a company owned by its CFO for her services as CFO on a contract basis in exchange for a fixed monthly fee.
$87,500 was paid for each of the years ending September 30, 2015 and 2014 per this agreement. Additionally, stock options with
a fair value of $0 and $7,469 for the years ended September 30, 2015 and 2014, respectively, were granted as additional compensation
directly to the CFO.



On July 16, 2013, the Company entered into
a Severance Agreement with its Chief Executive Officer pursuant to which he will be entitled to the following severance benefits:
(i) the Company shall pay his base salary ($200,000 as of September 30, 2015) for a period of 12 months following termination without
cause; (ii) he shall be paid any earned and unpaid bonus due; and, (iii) and all unvested stock-based compensation shall vest as
of the date of termination.



On January 6, 2014, the Company entered
into a license agreement with Eastar Industries, Co. (“Eastar”), pursuant to which the Company granted Eastar an exclusive
license to sell its products in China for a term of five years in exchange for a royalty equal to 18% of gross profits generated
by the sales of products in China. Additionally, the Company and Eastar agreed to establish a joint venture company in Hong Kong
or Shanghai which will be assigned Eastar’s rights under the agreement and of which 18% of the joint venture will be owned
by the Company. As of September 30, 2015, the joint venture has yet to be established. During the years ended September 30, 2015
and 2014 the Company had sales to Eastar in the amounts of $1,855 and $6,435, respectively.

The Company entered into an office lease agreement
commencing June 1, 2014 and expiring August 31, 2017. As part of the lease agreement, a concession of the first three months’
rent was provided. Total rent to be paid over the course of the lease is being expensed ratably over the period of the entire lease,
creating a deferred rent liability of $4,648 as of September 30, 2015. Rent expense was $26,517 and $24,807 for the years ended
September 30, 2015 and 2014, respectively. Future minimum lease payments under this agreement total $27,487 for 2016 and $25,703
for 2017.



On July 23, 2014, the Company entered into
an asset acquisition agreement. The agreement includes a liquidated damages clause in the amount of $20,000 should the Company
not move forward with product development within 12 months of the agreement date. This amount is reflected in accrued expenses
on the Company’s balance sheet as of September 30, 2015.



On August 28, 2014, the Company was named as
a Defendant in a lawsuit by a former officer alleging wrongful termination. On March 31, 2015, the Company entered into a settlement
agreement with the former officer wherein the Company shall pay $30,000 over the course of six months, starting on April 7, 2015.
The payments through September 30, 2015, totaling $30,000, have been made timely, satisfying the agreement in full.



On August 17, 2015, the Company entered into
an agreement with a company owned by its President for his services as President on a contract basis in exchange for a fixed monthly
fee. $15,624 was paid during the year ended September 30, 2015 per this agreement. Additionally, stock options with a fair value
of $32,545 were granted as additional compensation directly to the President in the year ended September 30, 2015.



During the year ended September 30, 2015, the
Company incurred $12,750 in expense related to a consultant that was ultimately settled by issuing 96,071 shares of stock. This
amount is included in accrued expenses at September 30, 2015.



The Company sells the majority of its products
through a distributor. The Company warrants to the distributors that the product will be free from defects in material and workmanship.
The Company has determined its product warranty to be immaterial at September 30, 2015 and 2014. The likelihood that the Company’s
estimate of the accrued product warranty claims will materially change in the near term is considered remote.





F-12





Note 11 - Stockholders’ Deficit



Common Stock

|                                                      |  | Number of Shares of Common Stock
|----------------------------------------------------- |  | --------------------------------
|Balance at September 30, 2013                         |  |                                 
|Issuance of stock for cash (1)                        |  |                                 
|Shares issued for conversion of notes payable (2)     |  |                                 
|Exchange of shares for interest expense (2)           |  |                                 
|Exchange of shares for services (3)                   |  |                                 
|Shares issued for exercise of warrants (4)            |  |                                 
|Shares issued for conversion of accounts payable (5)  |  |                                 
|Shares issued for asset purchase (6)                  |  |                                 
|Shares repurchased from former officer (7)            |  |                                 
|Balance at September 30, 2014                         |  |                                 
|Issuance of stock for cash (8)                        |  |                                 
|Exchange of shares for interest expense (9)           |  |                                 
|Exchange of shares for services (10)                  |  |                                 
|Shares issued for conversion of accounts payable (11) |  |                                 
|Balance at September 30, 2015                         |  |                                 





(1) On July 7, 2014, the Company sold
125,000 shares for $25,000 through a private placement.

(2) On March 3, 2014, the holder of
a convertible note elected to convert $5,000 of principal with interest into common stock at a preferred rate of $.25 per share,
rather than the $.50 per share amount stated in the original note. This resulted in the issuance of 20,000 shares for the note
conversion and 3,200 shares for the accrued interest.

During the year ended September 30,
2014, the Company issued 5,162,028 shares of stock in payment of interest totaling $258,101 on the primary debt holders convertible
note.

(3) During the year ended September
30, 2014, the Company issued 795,142 shares of common stock for services. The shares were valued at the average trading price over
the period of service, which approximated fair value, in the amount of $160,228.

(4) On February 5, 2014, the primary
debt holder submitted Warrant Exercise Notices pursuant to which it exercised all of its 26,200,000 outstanding warrants. They
elected to use the cashless exercise option provided for in the warrants, which resulted in the issuance of 22,457,143 shares of
common stock.

(5) On February 28, 2014, the Company issued
1,207,388 shares of common stock to two vendors in satisfaction of accounts payable of $301,847. On July 17, 2014, the Company
issued 75,000 shares of stock to a vendor in partial satisfaction of $28,148 in accounts payable.



(6) On July 23, 2014, the Company entered into
an asset acquisition agreement pursuant to which 300,000 shares of common stock were issued.



(7) On December 5, 2013, the Company entered
into a share re-purchase agreement with the former President to buy back 7,567,622 shares of common stock held by him and entities
under his control.  Other outside investors were granted the opportunity to participate in this purchase, with 1,550,000 shares
being purchased directly from the former President by others, and 6,017,622 being re-purchased and cancelled by the Company for
cash consideration of $601,762.



(8) On March 9, 2015, the Company sold 250,000
shares for $50,000 through a private placement.



Between August 11, 2015 and September 4, 2015,
the Company sold 1,850,000 shares for $185,000 through private placements.



(9) During the year ended September
30, 2015, the Company issued 7,277,533 shares of stock in payment of interest totaling $363,877 on the primary debt holders convertible
note.

(10) During the year ended September
30, 2015, the Company issued 498,271 shares of common stock for services. The shares were valued at the average trading price over
the period of service, which approximated fair value, in the amount of $86,001.

(11) On July 9, 2015 the Company issued 78,100
shares of stock to a vendor in satisfaction of accounts payable totaling $19,524.





F-13





Warrants:



Warrant activity for the years ended September 30, 2015 and 2014
follows:



|                                                                                                 |  | Common
                                         Shares Issuable
                                         Upon Exercise
                                         of Warrants |             | Exercise Price
    of Warrants |  | Date
Issued |      | ExpirationDate
|------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------------------------ |  | ----------- | ---- | --------------
|Balance
    of Warrants at September 30, 2013                                                    |  |                                                                                                                                                                             | 27,170,464  |                                |  |             |      |               
|Issued
                                         per distribution agreement (1)                   |  |                                                                                                                                                                             | 172,028     |                                |  | $           | 0.14 |               
|Issued
                                         under a private placement memorandum (2)         |  |                                                                                                                                                                             | 25,000      |                                |  | $           | 0.40 |               
|Issued
                                         under a private placement memorandum (2)         |  |                                                                                                                                                                             | 50,000      |                                |  | $           | 0.60 |               
|Issued
                                         under a private placement memorandum (2)         |  |                                                                                                                                                                             | 25,000      |                                |  | $           | 0.80 |               
|Warrants
                                         exercised (3)                                  |  |                                                                                                                                                                             | (26,200,000 | )                              |  |             |      |               
|Expired
                                         warrants                                        |  |                                                                                                                                                                             | (525,000    | )                              |  |             |      |               
|Balance
    of Warrants at September 30, 2014                                                    |  |                                                                                                                                                                             | 717,492     |                                |  |             |      |               
|Issued
                                         per distribution agreement (4)                   |  |                                                                                                                                                                             | 145,510     |                                |  | $           | 0.13 |               
|Issued
                                         under a private placement memorandum (5)         |  |                                                                                                                                                                             | 750,000     |                                |  | $           | 0.25 |               
|Issued
                                         under a private placement memorandum (5)         |  |                                                                                                                                                                             | 125,000     |                                |  | $           | 0.25 |               
|Issued
                                         under a private placement memorandum (5)         |  |                                                                                                                                                                             | 50,000      |                                |  | $           | 0.25 |               
|Stockbridge
                                         issued as part of convertible agreement (6) |  |                                                                                                                                                                             | 3,500,000   |                                |  | $           | 0.10 |               
|Expired
                                         warrants                                        |  |                                                                                                                                                                             | (300,000    | )                              |  |             |      |               
|Balance
    of Warrants at September 30, 2015                                                    |  |                                                                                                                                                                             | 4,988,002   |                                |  |             |      |               





(1) As discussed in Note 11, on December 23,
2013, the Company issued a three-year warrant at $.14 to purchase 172,028 shares of stock per a distribution agreement.



(2) On July 2, 2014, the Company issued stock
purchase warrants as part of stock subscription agreements.



(3) On February 5, 2014, Stockbridge submitted
Warrant Exercise Notices pursuant to which it exercised all of its 26,200,000 outstanding warrants. Stockbridge elected to use
the cashless exercise option provided for in the warrants, which resulted in the issuance of 22,457,143 shares of common stock.



(4) As discussed in Note 11, on December 22,
2014, the Company issued a three-year warrant at $.13 to purchase 145,510 shares of stock per a distribution agreement.



(5) Between August 12, 2015 and September 8,
2015, the Company issued stock purchase warrants as start of stock subscription agreements.



(6) As discussed in Note 9, on August 31, 2015,
the Company issued a five-year warrant to Stockbridge for the extension of the maturity date on the line of credit. The Company
recorded the fair value of the warrants, totaling $392,945, as a loss on extinguishment of debt for the year ending September 30,
2015.





F-14





The following is a summary of the Company’s
warrant activity for the years ended September 30, 2015 and 2014:



| |                                                         |  |  |  | Warrants    |   |  |   | Weighted Average Exercise Price |  |  |  | Weighted Average Remaining Contractual Life in Years | 
| | ------------------------------------------------------- |  |  |  | ----------- | - |  | - | ------------------------------- |  |  |  | ---------------------------------------------------- | 
| |                                                         |  |  |  |             |   |  |   |                                 |  |  |  |                                                      | 
| | Balance of Warrants at September 30, 2013               |  |  |  | 27,170,464  |   |  | $ | 0.12                            |  |  |  | 4.62                                                 | 
| | Granted                                                 |  |  |  | 272,028     |   |  | $ | 0.31                            |  |  |  | 2.02                                                 | 
| | Exercised                                               |  |  |  | (26,200,000 | ) |  | $ | 0.10                            |  |  |  |                                                      | 
| | Expired                                                 |  |  |  | (525,000    | ) |  | $ | 1.00                            |  |  |  |                                                      | 
| | Balance
of Warrants at September 30, 2014               |  |  |  | 717,492     |   |  | $ | 0.43                            |  |  |  | 1.35                                                 | 
| | Granted                                                 |  |  |  | 4,570,510   |   |  | $ | 0.13                            |  |  |  | 4.02                                                 | 
| | Exercised                                               |  |  |  | —           |   |  |   |                                 |  |  |  |                                                      | 
| | Expired                                                 |  |  |  | (300,000    | ) |  | $ | 0.41                            |  |  |  |                                                      | 
| | Balance
of Warrants at September 30, 2015 - outstanding |  |  |  | 4,988,002   |   |  | $ | 0.16                            |  |  |  | 3.75                                                 | 
| | Balance
of Warrants at September 30, 2015 - exercisable |  |  |  | 4,988,002   |   |  | $ | 0.16                            |  |  |  | 3.75                                                 | 





Stock Options:



On
October 4, 2013, the Company granted 433,333 stock options to corporate officers and 150,000 to a Board member. The options are
exercisable at $.11 per share with a ten year term. The options for the Board member vested immediately, the others vest equally
over three years.



On December 5, 2014, the Company repurchased
200,000 options from a former consultant for $2,500 as part of a settlement agreement.



On September 5, 2014, the Company granted 433,333
stock options to corporate officers, 200,000 stock options to a marketing consultant and product designer, and 150,000 stock options
to a Board member. The options are exercisable at $.25 per share with a ten year term. The options for the Board member vested
immediately, all others vest equally over three years.



On April 2, 2015, the Company entered into
an agreement with an option holder through which his option to purchase 200,000 shares with an exercise price of $.50, was cancelled
and he was granted a new option to purchase the same number of shares at a reduced price of $.10. The Company recognized an expense
of $3,640 in the year ended September 30, 2015 as a result of this stock option grant.



On August 17, 2015, the Company granted 500,000
stock options to a corporate officer. The options are exercisable at $.25 per share with a ten year term. The options will vest
equally over three years.



The Company determines the fair value of stock
options issued on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for determining
the fair value of the options granted during the years ended September 30, 2015 and 2014:



|                                                                     | For the year ended September 30,
|-------------------------------------------------------------------- | --------------------------------
|                                                                     | 2015                            
|Expected stock price volatility                                      | 32.78-32.90%                    
|                                                                     |                                 
|Expected dividend yield                                              | 0.00%                           
|                                                                     |                                 
|Risk-free interest rate                                              | 1.92-2.16%                      
|                                                                     |                                 
|Option life                                                          | 10.00 years                     
|                                                                     |                                 
|Stock-based compensation recognized                                  | $68,438                         
|                                                                     |                                 
|Unrecognized compensation expense to be recognized in future periods | $75,116                         
|                                                                     |                                 



We have recently become a public
company and common stock transactions were too infrequent, therefore we could not practicably estimate the expected volatility
of our own stock. Accordingly, we have substituted the historical volatility of a relevant comparable company that is publicly
traded and does business within the industry we operate.



The following is a summary of stock
option activity for the years ended September 30, 2015 and 2014:

| |                                                                                   | Number
ofStock Options |  | Weighted
Average
Exercise Price |            | Weighted
    Average Remaining Contractual Term in Years |  | Aggregate
Intrinsic Value
| | --------------------------------------------------------------------------------- | ---------------------- |  | ------------------------------- | ---------- | -------------------------------------------------------- |  | -------------------------
| | Balance
                                         of Options at September 30, 2013 |                        |  |                                 | 4,727,844  |                                                          |  | $                        
| | Granted                                                                           |                        |  |                                 | 1,366,666  |                                                          |  | $                        
| | Exercised                                                                         |                        |  |                                 | —          |                                                          |  |                          
| | Forfeited/Cancelled                                                               |                        |  |                                 | (200,000   | )                                                        |  | $                        
| | Balance of Options at September
                                         30, 2014 |                        |  |                                 | 5,894,510  |                                                          |  | $                        
| | Granted                                                                           |                        |  |                                 | 700,000    |                                                          |  | $                        
| | Exercised                                                                         |                        |  |                                 | —          |                                                          |  |                          
| | Forfeited/Cancelled                                                               |                        |  |                                 | (1,200,000 | )                                                        |  | $                        
| | Balance of Options at September
                                         30, 2015 |                        |  |                                 | 5,394,510  |                                                          |  | $                        
| | Vested
at September 30, 2015                                                      |                        |  |                                 | 3,466,730  |                                                          |  |                          









F-15





Note 12 - Customer Rebates



As part of an agreement with its domestic distributor,
the Company agreed to provide free product to assist in promotional efforts by the distributor. This free product was recognized
as credits on future orders as placed. During the years ended September 30, 2015 and 2014, this resulted in $0 and $74,648, respectively,
being recognized as customer credits against revenue and $0 and $14,238, respectively, in samples expense. No further credit remains
to be granted per this agreement.



Note 13 - Concentrations



The Company generally sells through a limited
number of large distributors. The Company invoices the distributors directly as opposed to the ultimate retail store. Consequently,
the Company’s sales are to a small number of customers. For the years ended September 30, 2015 and 2014, sales to our major
distributor was approximately 65% and 72%, respectively, of our total sales.



The Company’s products are manufactured
by a factory in China. The ability of the Company to meet product order deadlines would be significantly impacted if the factory
were to permanently cease operations for reasons outside of our control. During the years ended September 30, 2015 and 2014, the
Company purchased 100% and 34%, respectively, of their products from this factory.



Note 14 - Subsequent Events



On October 15, 2015 the Company entered
into an agreement with a patent attorney to provide intellectual property services as in-house patent counsel. The term of the
agreement is one year. Per the agreement, he will be paid cash compensation of $2,500 per month as well as monthly stock option
grants.

On November 5, 2015, the Company issued
641,200 restricted shares of common stock to a related party as payment for interest on loans to the Company for September 2015,
at a cost basis of $0.05 per share.

On December 31, 2015, the Company issued
1,282,400 restricted shares of common stock to a related party as payment for interest on loans to the Company for October and
November 2015, at a cost basis of $0.05 per share. Additionally, the Company issued an aggregate 200,000 restricted shares of common
stock to two shareholders at a cost basis of $0.10 per share pursuant to two subscription agreements dated between December 3,
2015 and December 14, 2015, and 96,071 restricted shares of common stock as compensation to a consultant for services rendered
to the Company between April 1, 2015 and September 30, 2015. The shares were valued at the average trading price over the period
of service, which approximated fair value, in the amount of $12,750.

On January 22, 2016, the Company entered
into an Allonge to the convertible note held by our primary debt holder, who is a related party, by which our line of credit was
increased by $200,000 and the conversion price of the outstanding principal balance was adjusted to $.08 from $.10.



F-16







|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------



None



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



Disclosure Controls and Procedures



Based on an evaluation
as of September 30, 2015, our Chief Executive Officer and Chief Financial Officer, conducted an
evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange
Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were not effective as of the end of the period covered by this report. Disclosure controls and procedures
are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management,
including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.



During the year ended September
30, 2015, management identified the following weaknesses, which were deemed to be material weaknesses in internal controls:





| | 1. | Due to the size of the Company and available resources, there are
limited personnel to assist with the accounting and financial reporting function, which results in a lack of segregation of duties.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | During the year ended September 30, 2015, the Company made payments
totaling $26,529 to an overseas vendor which were ultimately written off and forfeited. Accordingly, management determined the
controls around proper review and acceptance of vendors, prior to disbursing cash, were not sufficient to prevent such losses.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | As part of our year end procedures, we identified and recorded a
complete impairment of our intangible assets. As a result, management deemed the controls around the review and identification
of such matters to be inadequate.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | The Company identified several related party transactions as part
of the year end procedures, which were not previously disclosed.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------



Management’s Report on Internal
Control over Financial Reporting



Our management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934.  Our internal control over financial reporting is a process designed by, or
under the supervision of, our chief executive officer and chief financial officer, or persons performing similar functions, and
effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America (GAAP).  Our internal control over financial reporting includes those
policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company
are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could
have a material effect on the financial statements.



Management assessed the
effectiveness of the Company’s internal control over financial reporting as of September 30, 2015.  In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the
2013 Internal Control-Integrated Framework.  Based on its evaluation, management has concluded that the Company’s
internal control over financial reporting was not effective as of September 30, 2015.



Pursuant to Regulation
S-K Item 308(b), this Annual Report on Form 10-K does not include an attestation report of our company’s registered public
accounting firm regarding internal control over financial reporting.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions or that the degree of compliance with the policies or procedures may deteriorate. A control system, no matter how
well designed and operated can provide only reasonable, but not absolute, assurance that the control system’s objectives
will be met.  The design of a control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their cost.



Changes in Internal Control and Financial
Reporting



There have been no changes
in our internal control over financial reporting in the fiscal year ended September 30, 2015, which were identified in connection
with our management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION.
|-------- | ------------------



None.





40





PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------



Identification of Directors and Executive Officers and Term
of Office



The following table sets
forth the names and ages of our current directors and executive officers. Our Board of Directors appoints our executive officers.
Each director of the Company serves for a term of one year or until the successor is elected at the Company's annual shareholders'
meeting and is qualified, subject to removal by the Company's shareholders. Each officer serves, at the pleasure of the Board
of Directors, for a term of one year and until the successor is elected at the annual meeting of the Board of Directors and is
qualified. There are no family relationships among our directors or executive officers. None of our directors or officers has
been affiliated with any company that has filed for bankruptcy within the last five years. The Company is not aware of any proceedings
to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse
to the Company or any of the Company’s subsidiaries or has a material interest adverse to it or any of its subsidiaries.



|Name                 | Age |  | Position                                        
|-------------------- | --- |  | ------------------------------------------------
|Jeffrey Rassas       | 53  |  | Chief Executive Officer and Director            
|Jessica Smith        | 37  |  | Chief Financial Officer, Secretary and Treasurer
|Dr. Daniel E. Cohen  | 62  |  | President, Chief Medical Officer, and Director  
|Ronald L. Miller Jr. | 51  |  | Director                                        





Background and Business Experience



The business experience
during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:



Jeffrey Rassás.Mr.
Rassás served as CEO and President at YouChange Holdings Corp. (publicly traded/YCNG) from 2008 to 2012. Mr. Rassás
served as President and CEO of Global Alerts, holding company for Earth911.com and Pets911.com.  As CEO, Jeffrey led
the team that acquired Earth911.com, Pets911.com and AMBERalert.com from a local Arizona company in 2006, whereupon executing a
new strategy; recruiting a new management team and successfully executing the company’s plan led to several of the divisions
achieving national success and distinction and significantly higher values, and the successful sale of AMBERalert.com. Prior to
Global Alerts, Mr. Rassás served as Co-chairman and CEO of ImproveNet, Inc. (publicly traded/IMPV), which he acquired through
a merger in 2002.  Rassás’ strategic vision and execution led to industry recognition of the company as
“Best of Web” by Money Magazine.  In 2005, he sold the company to IAC/InterActiveCorp (IACI), the holding
company of many popular websites such as LendingTree, Ask.com, Match.com, Citysearch.com, ServiceMagic.com, and Ticketmaster, delivering
a substantial return on shareholder equity.   From 1997-2001, Mr. Rassás served as founder, CEO, and Chairman
of the Board of publicly traded EBIZ Enterprises, a Linux solutions provider where he expanded company operations, yielding revenues
in excess of $58 million. In addition, Mr. Rassás raised over $20 million dollars and took the company public in 1998.   A
two-time finalist for Ernst & Young’s Entrepreneur of the Year award, Mr. Rassás has been a guest speaker at Thunderbird,
the School of Global Management, serves on several outside boards including Executive Chairman of PSIOH/Timefire (a Virtual Reality
content developer start-up).



Jessica Smith.Ms.
Jessica Smith, CPA has been practicing accounting since graduating from Arizona State University in 2000. Ms. Smith started her
career with Arthur Andersen, LLP and moved on to working with several companies in the private sector before starting her own accounting
practice in 2008. Ms. Smith currently services a number of small and large local businesses with their financial accounting needs.
Ms. Smith is a member of several organizations, including the American Institute of Certified Public Accountants, the Arizona Society
of Certified Public Accountants and the National Association of Tax Preparers.



Dr. Daniel E. Cohen
MD.Dr. Dan Cohen co-founded CNS Inc. a developer and marketer of hi-tech medical equipment (brainwave monitors and sleep disorders
diagnostics) and consumer products in 1982. CNS was best known for the Breathe Right® nasal strip and FiberChoiceTM chewable
fiber supplement. It was acquired by GlaxoSmithKline in 2006 for $566 million. Dr. Cohen also co-founded Round River Research Corp.
in 1997 to study the healing and psycho-spiritual effects of synchronized sounds, vibrations and electromagnetic fields. He holds
numerous patents related to EEG signal processing, physiologic analysis algorithms and additional utility patents related to synchronized
sound, vibration and electromagnetic fields and their effect on the body and mind. Dr. Cohen has a BS from Penn State University
and MD from Temple Medical School. He trained in Neurology at the University of Minnesota Hospitals and Clinic and is a Diplomat
of the American Board of Psychiatry and Neurology. While presently not practicing clinical neurology, he remains a board-certified
neurologist.



RonaldL.Miller,Jr. Mr. Miller hasserved as Vice President, Chief Financial Officer, and Secretary
of Modern Round Entertainment Corporation, or Modern Round, since December 2015.Mr.
Miller has been a principal of a predecessor and current subsidiary of Modern Round since February 2014 and has served as itsChief
FinancialOfficersince April 2015.Mr.
Miller also hasservedasadirector and Chairman of the Audit CommitteeofQuestResource Holding CorporationsinceOctober2012.  Mr. MillerservedasadirectorofoneofQuest’s predecessors, Earth911,fromJuly2010toOctober2012.  Mr. Miller served as
Chief Executive Officer of Southwest CapitalPartners, LLC, an investment banking firm,
from September 2009 to March 2015.  HeservedasaManagingDirector of CKSSecuritiesLLC,an investmentbanking firm, from February2010 toDecember
2011.  Mr. MillerservedasViceChairmanofMillerCapital Markets,LLC,a Scottsdale,Arizonaheadquartered
boutiqueinvestmentbankingfirm from May2009 toAugust2009.  Heservedas Chief ExecutiveOfficerof AlareCapital Partners,LLC,aScottsdale-basedinvestmentbankingand strategic
advisory firm,fromSeptember 2005 toMay2009.  From2001 to2005, Mr. Millerserved as a Managing DirectorofTheSeidler CompaniesIncorporated, an investment banking firm and member of the NYSE.  Mr. Miller served from 1998 to 2001 as a Senior
Vice President and was instrumental in the opening of the Phoenix, Arizona office of Wells Fargo Van Kasper.  From1994 to 1998, Mr. Miller served as Senior Vice President of Imperial Capital, and from 1993 to 1994, was associated
with the Corporate Finance Department of Ernst & Young.  Mr. Miller began his career in the M&A department of
PaineWebber, Inc.





41





Identification of Significant Employees



We have no significant employees other than
our officers and directors.



Family Relationship



We currently do not have any officers or directors
of our Company who are related to each other.



Potential Conflicts of Interest



The Board of Directors
has not established a nominating committee. The Board is of the opinion that such committee is not necessary since the Company
has only two directors, and to date, such directors have been performing the functions of such committee. Thus, there is a potential
conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation
and nominations. We are not aware of any other conflicts of interest with any of our executive officers or directors.



Involvement
in Certain Legal Proceedings



During the past ten years
no director, executive officer, promoter or control person of the Company has been involved in the following:



| | (1) | A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | i.  Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ii.   Engaging in any type of business practice; or
| |  | ---------------------------------------------------



| |  | iii.  Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | i.  Any Federal or State securities or commodities law or regulation; or
| |  | ------------------------------------------------------------------------



| |  | ii.  Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | iii.  Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
| |  | --------------------------------------------------------------------------------------------------------------



| | (8) | Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





42





Code of Ethics



The Company has not adopted
a code of ethics that applies to its principal executive officers, principal financial officers, principal accounting officers
or controller, or persons performing similar functions. We anticipate that we will adopt a code of ethics when we increase the
number of our directors and officers, or the number of employees.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities
Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than ten percent of a
registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership
of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4
and amendments thereto furnished to us under Rule 16a-3(e) during the year ended September 30, 2015, Forms 5 and any amendments
thereto furnished to us with respect to the year ended September 30, 2015, and the representations made by the reporting persons
to us, we believe that during the year ended September 30, 2015, our executive officers and directors and all persons who own more
than ten percent of a registered class of our equity securities complied with all Section 16(a) filing requirements.





|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



Compensation of Officers



The following tables set
forth certain information about compensation paid, earned or accrued for services by our executive officers in the fiscal years
ended September 30, 2015, and September 30, 2014.



A summary of cash and other
compensation paid in accordance with management consulting contracts for our executives for the most recent two years is as follows:









|Name and Principal |  |                  |  |      |      |                |  |               |         | Stock
    Awards |  | Option
    Awards(5,6) |   | Non-Equity
    Incentive Plan Compensation |  | Nonqualified
    Deferred Compensation Earnings |        | All
    other compensation |  | Total
|------------------ |  | ---------------- |  | ---- | ---- | -------------- |  | ------------- | ------- | ---------------- |  | ---------------------- | - | ------------------------------------------ |  | ----------------------------------------------- | ------ | -------------------------- |  | -----
|Position           |  | Title            |  | Year |      | Salary
    ($) |  | Bonus
    ($) |         | ($)              |  | ($)                    |   | ($)                                        |  | ($)                                             |        | ($)                        |  | ($)  
|(a)                |  |                  |  | (b)  |      | (c)            |  | (d)           |         | (e)              |  | (f)                    |   | (g)                                        |  | (h)                                             |        | (i)                        |  | (j)  
|Jeffrey Rassas(1)  |  | CEO and Chairman |  |      | 2015 |                |  | $             | 200,769 |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|                   |  | of Directors     |  |      | 2014 |                |  | $             | 161,538 |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|Jessica Smith(2)   |  | CFO, Secretary   |  |      | 2015 |                |  | $             | 87,500  |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|                   |  | and Treasurer    |  |      | 2014 |                |  | $             | 87,500  |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|Dr. Daniel         |  | President and    |  |      | 2015 |                |  | $             | 15,624  |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|Cohen(3)           |  | Director         |  |      | 2014 |                |  | $             | 0       |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|Ronald L. Miller,  |  | Director         |  |      | 2015 |                |  | $             | 0       |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|Jr.                |  |                  |  |      | 2014 |                |  | $             | 0       |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|Dr. Lorrie         |  | Former           |  |      | 2015 |                |  | $             | 0       |                  |  | $                      | 0 |                                            |  | $                                               | 0      |                            |  | $    
|Henderson (4)      |  | COO              |  |      | 2014 |                |  | $             | 42,656  |                  |  | $                      | 0 |                                            |  | $                                               | 38,438 |                            |  | $    





Notes to Summary Compensation Table:



| | (1) | On July 16, 2013, the Company entered into a Severance Agreement (the
“Agreement”) with Jeffrey Rassas, the Company’s Chief Executive Officer (“Mr. Rassas”) pursuant to
which Mr. Rassas will be entitled to the following severance benefits: (i) the Company shall pay to Mr. Rassas his base salary
for a period of 12 months following termination without cause; (ii) Mr. Rassas shall be paid any earned and unpaid bonus due; and,
(iii) and all unvested stock-based compensation held by Mr. Rassas shall vest as of the date of termination. The preceding description
of the Agreement is a brief summary of its terms and does not purport to be complete, and is qualified in its entirety by reference
to the Severance Agreement, a copy of which was filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the Commission
on July 16, 2013 and is incorporated herein by reference.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | On September 20, 2012, the Company entered into an agreement with
a company owned by its CFO for her services as CFO on a contract basis in exchange for a fixed monthly fee.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | On August 17, 2015, the Company entered into that certain Consulting
Agreement with Dr. Daniel Cohen (“Dr. Cohen”) pursuant to which he shall provide consulting services to the Company
for a term of one year, unless earlier terminated, in exchange for a consulting
fee in the form of an annual salary of One Hundred Twenty Five Thousand Dollars ($125,000.00) and 500,000 total stock options to
purchase shares of common stock. The options are exercisable at $0.25 per share and vest over the next four years. The company
has calculated the estimated fair market value of the options granted using the Black-Scholes Option Pricing model and the following
assumptions: stock price at valuation, $.18, expected term of 10 years, exercise price of $.25, a risk free interest rate of 2.16%,
a dividend yield of 0% and a volatility of 32.78%.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Dr. Lorrie Henderson resigned from his position as Chief Operating
Officer of the Company on May 21, 2014.
| | --- | ----------------------------------------------------------------------------------------------------------

| | (5) | On October 4, 2013, Jeffrey Rassas, Jessica Smith and Ronald L. Miller,
Jr. were granted 333,333, 100,000 and 150,000 options to purchase shares of common stock, respectively. The options are exercisable
at $.11 per share of common stock over a ten year term. The options for Ronald L. Miller, Jr. vested immediately, all others vest
equally over the next three years. The Company has calculated the estimated fair market value of the options granted using the
Black-Scholes Option Pricing model and the following assumptions: stock price at valuation, $.08, expected term of 10 years, exercise
price of $.11, a risk free interest rate of 1.41%, a dividend yield of 0% and a volatility of 36.96%.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | On September 5, 2014, Jeffrey Rassas, Jessica Smith and Ronald L.
Miller, Jr. were granted 333,333, 100,000 and 150,000 options to purchase shares of common stock, respectively. The options are
exercisable at $.25 per share of common stock over a ten year term. The options for Ronald L. Miller, Jr. vested immediately, all
others vest equally over the next three years. The Company has calculated the estimated fair market value of the options granted
using the Black-Scholes Option Pricing model and the following assumptions: stock price at valuation, $.16, expected term of 10
years, exercise price of $.25, a risk free interest rate of 2.46%, a dividend yield of 0% and a volatility of 32.97%.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other than the foregoing, the Company
has no agreement that provides for payment to executive officers at, following, or in connection with the resignation, retirement
or other termination, or a change in control of Company or a change in any executive officer's responsibilities following a change
in control.







43





Outstanding Equity Awards at Fiscal Year-End



The table below summarizes the outstanding
equity awards to our executive officers as of September 30, 2015.



|OPTION AWARDS 
|--------------
|Name          
|Jeffrey Rassas
|              
|              
|Total         
|Jessica Smith 
|              
|              
|              
|Total         
|Daniel Cohen  
|              
|Total         





Compensation of Directors



As of September 30, 2015,
there is no cash compensation paid to directors for their service on our board of directors.



Employment Agreements



As disclosed in footnote
1 of the Notes to Summary Compensation Table herein, on July 16, 2013, the Company entered into a Severance Agreement with Jeffrey
Rassas, the Company’s Chief Executive Officer pursuant to which Mr. Rassas will be entitled to the following severance benefits:
(i) the Company shall pay to Mr. Rassas his base salary for a period of 12 months following termination without cause; (ii) Mr.
Rassas shall be paid any earned and unpaid bonus due; and, (iii) and all unvested stock-based compensation held by Mr. Rassas
shall vest as of the date of termination. The preceding description of the Agreement is a brief summary of its terms and does
not purport to be complete, and is qualified in its entirety by reference to the Severance Agreement, a copy of which was filed
as Exhibit 10.1 to the Current Report on Form 8-K filed with the Commission on July 16, 2013 and is incorporated herein by reference.



Other
than the foregoing, the Company has no agreement that provides for payment to executive officers at, following, or in connection
with the resignation, retirement or other termination, or a change in control of Company or a change in any executive officer's
responsibilities following a change in control.



44







|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



Security Ownership of Certain Beneficial Owners and Management



The following table lists,
as of February 29, 2016, the number of shares of common stock that are beneficially owned by (i) each person or entity known to
the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of the Company;
and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by principal shareholders
and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules
of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that
person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power,
which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any
security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission
rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial
owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has
sole voting and investment power.



|Name and Address of Beneficial Owner,
        Directors and Officers:                                                  | Amount and Nature of Beneficial Ownership | Percentage of Beneficial Ownership (1)
|---------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | --------------------------------------
|Jeffrey Rassas ICO (2)
        Hayjour Family Limited Partnership
        12689 N 120thPl
        Scottsdale, AZ 85259 | 2,888,076                                 | 3.88%                                 
|Jessica Smith(3)
        7377 E Doubletree Ranch Rd Suite 260
        Scottsdale, AZ 85258                             | 133,332                                   | 0.18%                                 
|Daniel Cohen
        7377 E Doubletree Ranch Rd Suite 260
        Scottsdale, AZ 85258                                 | 0                                         | 0.00%                                 
|Ronald L. Miller, Jr.(5)
        7377 E Doubletree Ranch Rd Suite 260
        Scottsdale, AZ 85258                     | 500,023                                   | 0.67%                                 
|All executive officers and directors as a group (4 people)                                                             | 3,521,431                                 | 4.73%                                 
|                                                                                                                       |                                           |                                       
|Beneficial Shareholders greater than 5%                                                                                |                                           |                                       
|Stockbridge Enterprises LP
        7377 E DoubleTree Ranch Rd Suite 200
        Scottsdale, AZ 85258                   | 21,643,471                                | 29.08%                                
|Southwest Capital Partners, LLC
        7377 E. Doubletree Ranch Rd., Suite 200
        Scottsdale, AZ 85258           | 4,066,000                                 | 5.46%                                 



| | (1) | Applicable percentage
    of ownership is based on 74,429,954 shares of common stock outstanding on February 29, 2016. Percentage ownership is determined
    based on shares owned together with securities exercisable or convertible into shares of common stock within 60 days of February
    29, 2016, for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
    voting or investment power with respect to securities.  Shares of common stock subject to securities exercisable
    or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of February 29, 2016,
    are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership
    of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.  Our
    common stock is our only issued and outstanding class of securities eligible to vote.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Jeffrey Rassas is
    the Company’s CEO and Director. Mr. Rassas’ beneficial ownership includes: 1,999,188 shares of restricted common
    stock and 888,888 shares issuable upon the exercise of stock options which have vested as of the date of this report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (3) | Jessica Smith is the Company’s CFO, Secretary and Treasurer. Ms. Smith’s beneficial
                                    ownership includes 133,332 shares issuable upon the exercise of stock options, which have
                                    vested as of the day of this report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (4) | Dr. Daniel Cohen is
    the Company’s President and Director. Dr. Cohen’s beneficial ownership includes 0 shares issuable upon the exercise
    of stock options, which have vested as of the day of this report                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (5) | Ronald L. Miller,
    Jr. is a Director of the Company. Mr. Miller’s beneficial ownership includes 450,000 shares issuable upon exercise of
    stock options which have vested as of the day of this report and 50,023 total shares purchased in May 2014. Of these shares
    21,250 were purchased by Windsor Westfield Management, LLC and 21,250 shares of common stock were purchased by Chickamauga
    Enterprises, L.P. Both companies are indirectly controlled by Mr. Miller. The remaining 7,523 shares are held directly by
    Mr. Miller.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



Change in Control



There
are no present arrangements or pledges of the Company’s securities that may result in a change in control of the Company.





45







|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|-------- | --------------------------------------------------------------------------



Director Independence



For purposes of determining
director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares of common stock
are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Director” means
a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the
opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director.



According to the NASDAQ
definition, Jeffrey Rassas and Dr. Daniel Cohen are not independent directors because each is also an executive officer of the
Company. According to the NASDAQ definition, Ronald L. Miller is an independent director.



Related Party Transactions



As detailed in Notes 7
and 8, the Company has a note payable to its former President, a convertible note payable to a former advisory board member and
another convertible note with an entity that owns 58.4% of our outstanding shares.



On December 5, 2013, the
Company entered into a share re-purchase agreement with the former President to buy back 7,567,622 shares of common stock held
by him and entities under his control.  Other outside investors were granted the opportunity to participate in this purchase,
with 1,550,000 shares being purchased directly from the former President by others, and 6,017,622 being re-purchased by the Company
and cancelled.  Upon completion of this transaction on December 17, 2013, our former President no longer has any ownership
in the Company.



As disclosed in Note 12,
on October 4, 2013, the Company granted a total of 583,333 stock options to officers and a Board member. Additionally, on September
5, 2014, the Company granted a total of 783,333 stock options to officers, significant consultants and a Board member.



On February 5, 2014, our
primary debt holder and a 58.4% shareholder submitted Warrant Exercise Notices pursuant to which it exercised all of its 26,200,000
outstanding warrants. The holder elected to use the cashless exercise option provided for in the warrants, which resulted in the
issuance of 22,457,143 shares of common stock. Additionally, during the year ended September 30, 2015, the Company borrowed an
additional $498,000 against the convertible secured note and issued 7,277,533 shares of stock in payment of interest on the convertible
note.



The Company paid $87,500
during the years ended September 30, 2015 and 2014 to a company owned by its CFO for her services as CFO. Additionally, we granted
0 and 200,000 options to our CFO directly for the years ended September 30, 2015 and 2014, respectively.



The Company paid $15,624
during the year ended September 30, 2015 to a company owned by its President for his services as President. Additionally, we granted
500,000 options to our President directly during the year ended September 30, 2015.



During the years ended
September 30, 2015 and 2014, the Company paid zero cash for interest on the related party debt.



Other than the foregoing,
none of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially
more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or
companies, has any material interest, direct or indirect, in any transaction that has occurred during the past fiscal year, or
in any proposed transaction, which has materially affected or will affect the Company.



With regard to any future related party
transaction, we plan to fully disclose any and all related party transactions in the following manner:



| | · | Disclosing such transactions in reports where required;
| | - | -------------------------------------------------------

| | · | Disclosing in any and all filings with the SEC, where required;
| | - | ---------------------------------------------------------------

| | · | Obtaining disinterested directors consent; and
| | - | ----------------------------------------------

| | · | Obtaining shareholder consent where required.
| | - | ---------------------------------------------



Review, Approval or Ratification of Transactions
with Related Persons



We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this
item.



46







|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------



On January 16, 2015, the Company appointed D.
Brooks and Associates CPA’s, P.A. as the Company’s registered independent public accounting firm. Our principal independent
accountant during the year ended September 30, 2014 was Weinberg & Baer, LLC. Their pre-approved fees billed to the Company
are set forth below:



|                                       |  | For Fiscal Year Ended September 30, 2015 |        | For Fiscal Year Ended September 30, 2014
|-------------------------------------- |  | ---------------------------------------- | ------ | ----------------------------------------
|Audit Fees                             |  | $                                        | 30,000 |                                         
|Audit-related fees                     |  | $                                        | Nil    |                                         
|Tax Fees (Paid to Weinberg & Baer LLC) |  | $                                        | 1,000  |                                         
|All other Fees                         |  | $                                        | Nil    |                                         
|Total                                  |  | $                                        | 31,000 |                                         



Audit
Fees



During
the fiscal year ended September 30, 2015, we incurred approximately $30,000 in
fees to our principal independent accountants for professional services rendered in connection with the audit and review of our
financial statements for fiscal year ended September 30, 2015.



During
the fiscal year ended September 30, 2014, we incurred approximately $35,000 in
fees to our principal independent accountants for professional services rendered in connection with the audit and review of our
financial statements for fiscal year ended September 30, 2014.



Audit-Related Fees



The
aggregate fees billed during the fiscal years ended September 30, 2015 and 2014 for assurance and related services by our principal
independent accountants that are reasonably related to the performance of the audit or review of our financial statements (and
are not reported under Item 9(e)(1) of Schedule 14A) was $NIL and $NIL,
respectively.



Tax Fees



The
aggregate fees billed during the fiscal years endedSeptember 30,
2015 and 2014 for professional services rendered by our tax accountant for tax compliance, tax
advice and tax planning were$1,000and
$858, respectively. Tax services performed by Weinberg & Baer, LLC were pre-approved by our audit committee.



All Other Fees



The
aggregate fees billed during the fiscal years ended September 30, 2015 and 2014 for products and services provided by our principal
independent accountants (other than the services reported in Items 9(e)(1) through 9(e)(3) of Schedule 14A) was $NIL and
$NIL, respectively.



PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
|-------- | -----------------------------------------



|Exhibit  |                                                                                                                                |  |                                                                                        
|-------- | ------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------
|Number   | Description of Exhibit                                                                                                         |  |                                                                                        
|3.01a    | Articles of Incorporation                                                                                                      |  | Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
|3.01b    | Certificate of Amendment to Articles of Incorporation dated October 26, 2012                                                   |  | Filed with the SEC on November 13, 2012 as part of our Current Report on Form 8-K      
|3.02     | Bylaws                                                                                                                         |  | Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
|10.01    | Patent Sale Agreement                                                                                                          |  | Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
|10.02    | License Agreement between Crown Dynamics Corp. and Zorah LLC                                                                   |  | Filed with the SEC on January 20, 2012 as part of our Current Report on Form 8-K.      
|10.03    | Share Exchange Agreement between Crown Dynamics Corp. and Airware Dated March 20, 2012                                         |  | Filed with the SEC on March 26, 2012 as part of our current report on Form 8-K.        
|10.04    | Severance Agreement between Airware Labs Corp and Jeffrey Rassas, effective July 16, 2013                                      |  | Filed with the SEC on July 19, 2013 as part of our Current Report on Form 8-K.         
|10.05    | Share Re-Purchase Agreement between Airware Labs Corp. and DCI, LLC, Technoflex, LLC, and Viadox, LLC, dated December 5, 2013. |  | Filed with the SEC on December 24, 2013 as part of our Current Report on Form 8-K.     
|31.01    | Certification of Principal Executive Officer Pursuant to Rule 13a-14                                                           |  | Filed herewith.                                                                        
|31.02    | Certification of Principal Financial Officer Pursuant to Rule 13a-14                                                           |  | Filed herewith.                                                                        
|32.01    | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act                                                            |  | Filed herewith.                                                                        
|32.02    | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act                                                            |  | Filed herewith.                                                                        
|99.1     | Crown Dynamics Corp. Subscription Agreement                                                                                    |  | Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
|101.INS* | XBRL Instance Document                                                                                                         |  | Filed herewith.                                                                        
|101.SCH* | XBRL Taxonomy Extension Schema Document                                                                                        |  | Filed herewith.                                                                        
|101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document                                                                          |  | Filed herewith.                                                                        
|101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document                                                                               |  | Filed herewith.                                                                        
|101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document                                                                         |  | Filed herewith.                                                                        
|101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document                                                                           |  | Filed herewith.                                                                        

*Pursuant to Regulation S-T, this interactive
data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities
Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject
to liability under these sections.



47







SIGNATURES



In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                    | Airware Labs Corp.                                                                  
|------------------- | ------------------------------------------------------------------------------------
|                    |                                                                                     
|Date: April 5, 2016 | By:                                                                                 
|                    | Name:  Jeffrey Rassas
        Title:    Chief Executive Officer and
        Director



|Date: April 5, 2016 | By:                                                                                   | /s/
    Jessica Smith | 
|------------------- | ------------------------------------------------------------------------------------- | --------------------- | 
|                    | Name:  Jessica Smith
        Title:    Chief Accounting and Financial
        Officer





|Date: April 5, 2016 | By:                                                              | /s/
    Dr. Daniel Cohen | 
|------------------- | ---------------------------------------------------------------- | ------------------------ | 
|                    | Name:  Dr. Daniel Cohen
        Title:    President and Director





In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                    | Airware Labs Corp.                                                                  
|------------------- | ------------------------------------------------------------------------------------
|                    |                                                                                     
|Date: April 5, 2016 | By:                                                                                 
|                    | Name:  Jeffrey Rassas
        Title:    Chief Executive Officer and
        Director



|Date: April 5, 2016 | By:                                                              | /s/
    Dr. Daniel Cohen | 
|------------------- | ---------------------------------------------------------------- | ------------------------ | 
|                    | Name:  Dr. Daniel Cohen
        Title:    President and Director



|Date:
    April 5, 2016 | By:                                                     | /s/
    Ronald L. Miller, Jr. | 
|----------------------- | ------------------------------------------------------- | ----------------------------- | 
|                        | Name:  Ronald L. Miller, Jr.
        Title:    Director







48